Comments on: Investing for Beginners http://www.frugalistajapan.com/2009/06/investing-for-beginners/ Money saving tips and ideas for foreigners in Japan! Mon, 12 Jul 2010 23:37:14 +0000 http://wordpress.org/?v=abc hourly 1 By: wrightak http://www.frugalistajapan.com/2009/06/investing-for-beginners/comment-page-1/#comment-384 wrightak Tue, 25 Aug 2009 05:28:14 +0000 http://www.frugalistajapan.com/?p=397#comment-384 I wouldn't put any money into a managed fund unless you have good reason to believe in the manager. Here's why: On average, half of managed funds will beat the market, and half of them well do worse than the market. Managers cost money so when you take costs into account, the probability that you will choose a manager that beats the market is less than 50%. Instead, for long term investments, I would choose an index tracker. Index trackers don't have management fees and will track the market exactly. Therefore, on average, an index fund will do better than a managed fund. If you've got good reason to believe in the manager then that's fair enough but if you haven't got a clue, it doesn't make any sense. .-= wrightak´s last blog ..<a href="http://wrightak.blogspot.com/2009/08/whats-point.html" rel="nofollow">What’s the point?</a> =-. I wouldn’t put any money into a managed fund unless you have good reason to believe in the manager. Here’s why:

On average, half of managed funds will beat the market, and half of them well do worse than the market. Managers cost money so when you take costs into account, the probability that you will choose a manager that beats the market is less than 50%.

Instead, for long term investments, I would choose an index tracker. Index trackers don’t have management fees and will track the market exactly. Therefore, on average, an index fund will do better than a managed fund.

If you’ve got good reason to believe in the manager then that’s fair enough but if you haven’t got a clue, it doesn’t make any sense.
wrightak´s last blog ..What’s the point? My ComLuv Profile

]]> By: kk http://www.frugalistajapan.com/2009/06/investing-for-beginners/comment-page-1/#comment-311 kk Wed, 22 Jul 2009 07:28:28 +0000 http://www.frugalistajapan.com/?p=397#comment-311 While I fully understand your desire to invest morally, it is important for the general reader to understand that doing so -- at least using the approach you suggest above -- also takes on a lot of risk. You mention that you understand your plan is high risk. However, I do not think that advice is sound for a beginning investor, who may not have much to invest, and who likely will not understand the risk/reward calculus involved for any one investment. A better alternative would be to invest in an index fund, which essentially buys the whole market. There are many that have very low fees. I would suggest your readers research index funds in addition to those you suggest above. I would also suggest that they read up on "diversity", as diversification and diversity of investment is important to limit risk exposure. While I fully understand your desire to invest morally, it is important for the general reader to understand that doing so — at least using the approach you suggest above — also takes on a lot of risk. You mention that you understand your plan is high risk. However, I do not think that advice is sound for a beginning investor, who may not have much to invest, and who likely will not understand the risk/reward calculus involved for any one investment.

A better alternative would be to invest in an index fund, which essentially buys the whole market. There are many that have very low fees. I would suggest your readers research index funds in addition to those you suggest above. I would also suggest that they read up on “diversity”, as diversification and diversity of investment is important to limit risk exposure.

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