Index Funds: The Best Investment Advice Is Not Always The Most Popular

Image via WikipediaOne of the worst problems an investor has is figuring out how to ride the highs and lows of your portfolios performance. The highs can be exhilarating and the lows are always gut wrenching. There has to be a way to invest that allows you to not worry so much. 


What is the key for staying the course?

At the nytimes.com an article describing  the research of Janet M. Brown, president of DAL Investments, revealed the returns of 306 mutual funds over a 20 year period.  She wanted to see if active management was actually the best way. Brown said, “The overall challenge of mutual fund investing is selecting funds in advance that people think will do well in the future,” Ms. Brown continues. “The easiest thing would be to buy and hold or to select a manager with a good long-term track record and buy it and forget it. That was not an effective way of selecting funds.”

Find more information at The Best Investing Advice? Maybe Not the Conventional Method

Performance.
Mutual funds usually compare their returns to the returns of the S.& P. 500 or the Vanguard S.& P. 500 Index Fund. Strategies that use mutual funds in different combinations to build portfolio's can't produce superior results. But Browns research indicated, over the last two decades, no non-index fund investment strategy dominated. At best, some strategies were only successful for a four to five year period on average. Not one fund beat the benchmark every year.

Investment Management.
You will always find the hot manager of the year making tons of money for their clients. Eventually, all managers under perform the benchmark S&P. No particular investment strategy was successful for the entire period of this research.

Expenses.
All investors usually can agree on the idea that high expenses wear away performance. You can always find some funds with high expenses that have outperformed the index. But you will find they have, on average, returned only 1 percent more than the benchmark S&P 500.

Brown's Best Non-Index Fund Strategy. Brown's best non index fund strategy for using mutual funds surpassed the benchmark S&P 500 with a 12.19 percent return. Yet it underperformed the benchmark 9 out of 20 times. 

Takeaway.
Brown admits that the benchmark S&P 500 index has returned 7.65 percent over the last 20 years. I think most investors would be quite happy with that. There are mutual funds that produce a higher return but they don"t do it consistently. The trouble is finding these great performers on a consistent basis. The bottom line is index funds make the most sense for the average investor.

I have found the best implementation of an index fund centered portfolio is Paul Merrimans "Ultimate Buy and Hold Strategy". It has 11 different asset classes giving a broad, diversified group of index funds that will provide a good return over time. The days of tracking down the so called best funds will be over. You will be able to sit back and know you have done all you can to properly invest your money.


Check out Paul Merriman's Ultimate Buy and Hold Strategy here.

Find all Paul Merriman's great strategy and sample portfolios here.

Related articles

• Book Review - Financial Fitness Forever: 5 Steps to More Money, Less Risk, and More Peace of Mind by Paul Merriman (50plusfinance.com)
• Walking With Giants: An Interview with Paul Merriman (businessinsider.com)

"Super Committee's" Failure Shows, We're On Our Own

Image via WikipediaOnly in Washington D.C. can you meet for half a year and return with no results. If Congress were employees of a company they would be immediately fired. Their failure sets in motion automatic budgets cuts that take place in 2013.

It doesn't matter who's at fault, the people will have to pay the price to clean up the mess. The automatic cuts will total 1.2 trillion dollars over 10 years. It sounds like a lot of money but over ten years it amounts to only 120 billion per year. That is about 10 percent of the $1 trillion dollar yearly deficit. What happens to the other 90 percent of the deficit. The politicians failure to make needed spending cuts frees them from the burden of taking the blame in the next election. With the election one year away who wants to take the blame for budget cuts.

I remember only a few years ago when a committee was assigned a task to come up with recommendations concerning the deficit. After a year deliberating the committee came up with recommendations for the president. The president didn't take action on any of them. From now on whenever I hear the word committee coming out of Washington, I will think big waste of time. I wonder why politicians don't understand how people have lost faith in their government.

Related: The Deficit Commission Comes In DOA

What's the average person do now?

The problem with all this is the people have become all to dependent on their government for all their needs. The government can't get out of its own way. We believe Washington can fix anything. It can't fix itself, how can it fix your problems?

It only makes me wonder when I am living in retirement, what I will be doing. I don't want to be living under the hopeful good intentions of a government led by men who have to do things not for my benefit but to get themselves elected again. We have finally pushed the limits on the nanny-state. Cradle to grave care by the government is a dismal failure. Trusting in a government that can give a retirement check, can also be a government that can take one away from you.

The most important lesson learned from all this is that you are responsible for your own welfare. It's your job to take care of you. Only you can take care of yourself. Preparing for your health care and retirement is your job. Remember the old saying, "If you want it done right, you have to do it yourself."

With the new year coming, make a resolution to prepare for your future. Save and invest to take care of yourself before it's to late. Start that Roth Ira and get that health care arranged. Start that emergency fund. Quit buying everything in site. Invest the money into your future.

Bloggers Vs. Financial Gurus - Who Helps More?

Image by Casey Serin via FlickrYou know their names Suze Orman, Dave Ramsey, Robert Kiyosaki, Liz Pullman, and David Bach. They are today's financial gurus. We hang on their every word and gage all our actions by their wise advice. 

Online we have thousands of personal finance bloggers relating their own advice and experiences. Which group is better suited to address your situation?

Both sources have much to give to financial education and advice. The Guru's advice does help many people and by the numbers, help many more than bloggers in general. They have access to an audience through TV or by books they have written. The Guru has access to millions of followers and can reach more everyday. The blogger has limited followers and limited access to promotional services. Their audience is smaller but they can help people as well. 

Check out Businessinsider.com "Who are You Listening to?"

If both are able to help people with financial advice and education, which one is more effective.

The Guru has more followers but is limited because they have to spread their wisdom to a mass audience. Why limited? Their books and television appearances have to appeal to a mass audience. This limits them to a general message or plan. It has to be a one size fits all. They have to appeal to the most people to maximize their message so they can sell books and merchandise. Their advice is correct in general. But what if their advice doesn't cover your specific problems?

There are as many different financial situations, as there are people. This is where the financial blogger is better than the financial Guru. Many bloggers write about their own specific situation and experiences. They relate to their readers how they overcame a financial problem in their life. What could be a better way to help someone with a problem, when you already had the problem and overcame it. That's what makes the financial bloggers better than the Gurus.

With all the financial bloggers out there, you should be able to find one that speaks to your situation. Your average blogger doesn't have a manager or book to peddle. They are able to get real with their audience. The hype is very low and the experience is very personal. Many bloggers write about their financial journey from being broke to getting out of debt. Their stories are personal and inspiring. They make you actually believe you can overcome your financial problems.

A Different Reason For Refinancing Your Home

Image via WikipediaWith interest rates at historical lows, refinancing is on the minds of many homeowners. Weighing the benefits against the costs is the only way to determine if it makes sense. We all are looking for that lower mortgage payment so we can use the savings for other things, it's the usually the only reason that someone refinances their home. But maybe there is another way to think about it?

When thinking about refinancing, a better way to weigh the decision is to evaluate the "net benefit". Net benefit represents the overall impact on your personal wealth from refinancing your home mortgage. With that in mind, CreditSesame.com has an infographic spotlighting a new way to think about refinancing your mortgage.

The infographic explains net benefit and an example case study of a proposed refinance. In the infographic, the proposed mortgage refinance has the homeowners making a larger payment over a shorter term. Raising your mortgage payment sounds counter productive but for the example, it actually doubled the net benefit and equity of the home for the home owners.

Should I Refinance My Mortgage? Here’s a New Way to Think About It [Credit Sesame]

When Did The Thanksgiving Day Holiday Begin and Who Was Sarah Josepha Hale?

We all know the Thanksgiving story when the Pilgrims landed the Mayflower on Plymouth Rock. But when was the actual legal holiday established? 


Right in the middle of the Civil War, President Abraham Lincoln took the time to proclaim Thanksgiving a national holiday. 

But little is known of who really was behind influencing Lincoln and the government to make Thanksgiving a holiday.

Sarah Joespha Hale

Little is known of the women who petitioned Lincoln and the four previous presidents to establish the holiday. Her name was Sarah Josepha Hale and she is credited as the individual most responsible for making Thanksgiving a national holiday in the United States; it had previously been celebrated only in New England. 

Each state scheduled its own holiday, some as early as October and others as late as January; it was largely unknown in the American South. Her advocacy for the national holiday began in 1846 and lasted 17 years before it was successful. In support of the proposed national holiday, she wrote letters to five Presidents of the United States -- Zachary Taylor, Millard Filmore, Franklin Pierce, James Buchanan, and Abraham Lincoln. 

Her initial letters failed to persuade, but the letter she wrote to Lincoln did convince him to support legislation establishing a national holiday of Thanksgiving in 1863. 

The new national holiday was considered a unifying day after the stress of the American Civil War. Prior to the addition of Thanksgiving, the only national holidays celebrated in the United States were Washington's Birthday and Independence Day.

Lincoln's Proclamation Establishing Thanksgiving Day:

The year that is drawing towards its close, has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added, which are of so extraordinary a nature, that they cannot fail to penetrate and soften even the heart which is habitually insensible to the ever watchful providence of Almighty God. In the midst of a civil war of unequalled magnitude and severity, which has sometimes seemed to foreign States to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere except in the theatre of military conflict; while that theatre has been greatly contracted by the advancing armies and navies of the Union. Needful diversions of wealth and of strength from the fields of peaceful industry to the national defence, have not arrested the plough, the shuttle, or the ship; the axe had enlarged the borders of our settlements, and the mines, as well of iron and coal as of the precious metals, have yielded even more abundantly than heretofore. Population has steadily increased, notwithstanding the waste that has been made in the camp, the siege and the battle-field; and the country, rejoicing in the consciousness of augmented strength and vigor, is permitted to expect continuance of years, with large increase of freedom. 

No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy. 

It has seemed to me fit and proper that they should be solemnly, reverently and gratefully acknowledged as with one heart and voice by the whole American people. I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens. And I recommend to them that while offering up the ascriptions justly due to Him for such singular deliverances and blessings, they do also, with humble penitence for our national perverseness and disobedience, commend to his tender care all those who have become widows, orphans, mourners or sufferers in the lamentable civil strife in which we are unavoidably engaged, and fervently implore the interposition of the Almighty Hand to heal the wounds of the nation and to restore it as soon as may be consistent with the Divine purposes to the full enjoyment of peace, harmony, tranquillity and Union. 

In testimony whereof, I have hereunto set my hand, and caused the seal of the United States to be affixed. 

Done at the city of Washington, this third day of October, in the year of our Lord one thousand eight hundred and sixty-three, and of the independence of the United States the eighty-eighth. 

A. Lincoln

So when you are sitting down to have your Thanksgiving dinner give thanks also for Sarah Josepha Hale, for all her perseverance and hard work in making our national holiday a permanent part of our culture and history.

The Smart Way for Daily Deal Shopping

Image by Glikò via FlickrAuthor Bio: Kevin is the author of the DebtEye Blog. He is the co-founder of DebtEye and a certified credit counselor.

Daily deal websites have taken the web by storm over the past few years. I usually advised my readers to unsubscribe from the newsletters, but I soon came to realize that some of the deals can actually save you money.

At first, I was against subscribing to some of the daily deal sites because it created a lot of impulse shopping. I was buying “coupons” for items that I didn’t need, and a lot of these actually went unused. A prime example of this is when I bought a $25 Virgin America voucher which was valued at $100. I didn’t read the fine prints, and didn’t know I had to book a reservation within a certain date.

Budgeting is all about saving money right? When you come to think about it, this is what daily deal sites are trying to do. If you’re able to keep disciplined in purchasing the coupons, it can definitely make a difference. Here are some ways you can prevent yourself from going a bit too crazy with daily deals:

1) Spend money wisely – If you’re a fan of daily deal sites, make sure you include this in your budget. It can count towards your entertainment category or your food if you intend to only buy coupons for restaurants. Set a limit on how much you’re willing to spend on it every month. If you can stick to your budget, then it shouldn’t be a problem!

2) Take your time- If you see a deal that you like; take a second to really ask yourself if you really need it. Is it a necessity, or is it a luxury? The truth of the matter is that it’s not going to go way forever. There’s a high chance that a similar coupon will resurface. If you have regrets on not buying it the first time around, you’ll always have a second chance!

3) Niche Markets- As I mentioned, the boom of this industry caused a handful of niche daily deal companies to emerge. Some of my favorite ones are (Aisle50 & CampusCred). Aisle50 focuses solely on grocery items, and have partnerships with some of the major grocery chains. You’ll end up buying items that you need, and they probably won’t go to waste (unless you don’t end up eating your food). CampusCred focuses on daily deals for college campuses which includes tons of restaurants. This is deal for college students who tend to eat out often.

4) Extreme Deals – Once in a while, a new daily deal sites will emerge and giveaway pretty useful coupons. Some of these include a $10 for $20 Amazon gift card or a $4 AMC movie ticket all in hopes to gain subscribers. Jump on these deals before it gets sold out, because these are items that you’re definitely going to use in the future.

5) Use Your Coupons – Lastly but not least, use your coupon! If you’re the type of person who forgot to use your coupon, that’s exactly the reason why a secondary market for unused coupons emerged. If you don’t think you can use your coupon within the expiration date, make sure you sell it to get something out of it at least.

So there you have it. I confess that I started to subscribe to some of the daily deal websites, but I’m definitely more cautious on what I purchase. Use common sense when purchasing coupons, and make sure it’s a necessity, not a luxury!