If you had $10,000 laying around...

[TeamOxford]

Originally Posted by Perfectlap

Its the big dirty secret of most 401k plans that try to steer you into mutual funds instead of index funds.

An index fund IS a mutual fund, just one that is not actively managed, and carries a lower expense ratio.

If the OP is seriously considering investing $10k, I would suggest that he do nothing (other than putting it in a savings account) for at least six months, while he does his own research on the subject. It's not rocket science, trust me.

It was originally stated that the money was"$10,000 that you don't need(assume that all bills, etc. are paid" and that the OP was "thinking of investing, but haven't the first clue where to start."

I'd make sure that some of the tenets laid out by fatmike had been fulfilled first:

1 - Have 6 months of living expenses in a savings account. If you don't have this already, do it and maintain it.
2 - Pay off any high interest debt (credit card, car loan, etc.).

But if you're really looking for more of a kick than watching your money grow, I'd do what Porsche Chick suggests:

"spend a month in France, renting an apartment, flying cheap, and eating cheap."

OR............for just $10,000, you could subscribe to the TeamOxford Postcard Club, which guarantees you a brand new postcard EVERY WEEK for a full year, from some new exotic locale!

Just PM me, dude!

TO

[01SBox]

Very good advice.

Originally Posted by TeamOxford

An index fund IS a mutual fund, just one that is not actively managed, and carries a lower expense ratio.

If the OP is seriously considering investing $10k, I would suggest that he do nothing (other then putting it in a savings account) for at least six months, while he does his own research on the subject. It's not rocket science, trust me.

It was originally stated that the money was"$10,000 that you don't need(assume that all bills, etc. are paid" and that the OP was "thinking of investing, but haven't the first clue where to start."

I'd make sure that some of the tenets laid out by fatmike had been fulfilled first:

1 - Have 6 months of living expenses in a savings account. If you don't have this already, do it and maintain it.
2 - Pay off any high interest debt (credit card, car loan, etc.).

But if you're really looking for more of a kick than watching your money grow, I'd do what Porsche Chick suggests:

"spend a month in France, renting an apartment, flying cheap, and eating cheap."

OR............for just $10,000, you could suscribe to the TeamOxford Postcard Club, which guarantees you a brand new postcard EVERY WEEK for a full year, from some new exotic locale!

Just PM me, dude!

TO

[Porsche Chick]

OR............for just $10,000, you could suscribe to the TeamOxford Postcard Club, which guarantees you a brand new postcard EVERY WEEK for a full year, from some new exotic locale!

Just PM me, dude!

TO[/QUOTE]

For $10K, I will send you a postcard Twice a week!

[Perfectlap]

Originally Posted by TeamOxford

An index fund IS a mutual fund, just one that is not actively managed, and carries a lower expense ratio.

yes I should not have have used 'mutual fund' to describe all actively managed funds in contrasting them to passively managed index funds. My mistake, but expense ratios are most certainly not the only difference between passive and active management of your mutual funds. Expense ratios which the actively managed mutual fund industry loves to tout, are only half the story: Expense ratios do NOT include transaction costs and hidden fees (the point of my previous post) and these are nearly as much as the actively manged fund's already over-inflated expense ratio. costs on top of cost. These too are almost always higher than passive index funds.

The last think tank (Demos-Hiltonsmith Report) that took a hard look at what this 'double charge' represents to a two-earner household where each is making the average U.S. salary estimated:

$50K invested returning 7.11% (mutual fund average before inflation) = +$3,555
Expense ratio 1.23% = -$615
(Now the part they leave out of the expense ratio)
transaction fees 1.23% = -$615

true fees: ( $615+$615)/$3,355 = 34.6%
Now toss in inflation to whittle down the 7% return to 5% and the 'true fees' are nearing 50%........

Cost to that average income household? nearly $155K in lost savings. If your're in the higher income household bracket? Nearly $280K. Meh...who needs $280k
Already retired and you left the $357,872 in the 401k put? First year of retirement you'd be out $5,723 in fixed expense ratio fees and variable costs. That's a nice trip to Hawaii you're not taking for nothing in return.

expense ratios are not the only difference folks. Take a hard look at your actively managed mutual fund investments. And don't be surprised if you don't see these transaction costs and hidden fees in your prospectus. They leave those for the SAIs than no one ever reads and are opaquely reported. Largely why the lawyers have gotten nowhere in fighting these 'excessive fees' in many legal cases, they tell you up front that you're being taken to the cleaners but most think the expense ratio is the only consideration.

and as far as the actual performance part of the equation, consider this scathing analysis of mutual fund 'managers'
S&P 500 index funds beat 99.6% of fund managers over 10 years-- Number of fund managers that beat the S&P over the past 5 years: 5

[Porsche Chick]

Originally Posted by Perfectlap

and as far as the actual performance part of the equation, consider this scathing analysis of mutual fund 'managers'
[URL="http://www.zerohedge.com/news/2013-04-29/wall-street-rentier-rip-index-funds-beat-996-managers-over-ten-years"]S&P 500 index funds beat 99.6% of fund managers over 10 years-- Number of fund managers that beat the S&P over the past 5 years: 5[/URL]

I think you and I are on the same page, PL. One of my best friends' husband is a fund manager and he's just thrilled when he beats the index by 3%. This is considered very good in his circles. I just because I know it all gets eaten by fees.

Earlier in this thread, someone mentioned Berkshire B stock and I think that is as close to a no fee "fund" as you can get, without buying an actual mutual fund. A diversified mix of businesses, active management, and their lows are not quite as bad as the Dow 30 lows. It's a thought . . .