Our investment philosophy is simple and, well, boring. Use primarily low-cost index funds and set up a well diversified portfolio using a good asset allocation model that fits your circumstances and helps you sleep ok at night. You don’t need to manage or “watch it” regularly. In fact, reviewing it 15 to 20 minutes a year is fine for most people. Really!
We believe that over-managing your portfolio or hiring expensive advisory services doesn’t pay off. You only need to rebalance your portfolio periodically and modify your allocations if a life event requires a change or your risk temperament adjusts. Focus more on the things you control, like how much you save, managing your budget and expenses, and planning for the future.
The following reports represent a brief sample of the data available on this and related topics:
Morningstar’s Active/Passive Barometer: As of mid year 2016, the numbers continue to look awful for actively managed funds. Fees matter – and trying to beat the market, even for the well-compensated professionals, is as difficult as ever.
The Harm in Selecting Funds That Have Recently Outperformed. February 2016. Once again, this report reviews the effectiveness of investing in funds with strong recent performance and how this approach can produce a poor outcome. Produced by Cornell, Hsu, and Nanigian
Are 401K Investment Menus Set Solely for Plan Participants, August 2015? As it turns out, this is a rhetorical question. The study indicates that having an advisory firm that provides funds for the retirement plan may lead to the inclusion of funds that don’t perform as well.
The Impact of Management Fees on Value What’s Left After Wall Street is Paid. A 2015 report from the New York City Comptroller. This is virtually an infographic. The bottom line is that, after fees, there is essentially no additional value provided by investment management services.
Wall Street Fees and Investment Returns for 33 State Pension Funds, Maryland Public Policy Report, August 2015. An updated report on how pension funds with higher fund and management expenses do not perform as well as pensions with loser cost funds.
Quantifying the Impact of Chasing Performance, Vanguard July 2014. A short report that shows how damaging it can be to select and replace mutual funds based upon recent superior performance. A boring buy and hold strategy of index investments would outperform in most cases.
Fixing the Drain on Retirement Savings. A report on how fees are impacting the performance in employer based retirement plans with an interesting idea on what can be done to improve it.
The Impact of Fees on Participant Outcomes, PlanSponsor, November 2012. This analysis discusses how plan fees affect participants’ savings.
Wall Street Fees and The Maryland Public Pension Funds, Maryland Policy Report, July 2013. This study is updated from the 2012 report which recommends indexing for Maryland’s Public Pension Fund and all Pension Funds in the US.
Picking Winners? Investment Consultants Recommendations of Fund Managers. Jenkinson, Jones, and Martinez, Said Business School, Oxford University. September 2013. This study reports there is little to no evidence to indicate that consultants’ fund recommendations add value to plan sponsors of institutional plans funds.
SEC Investor Bulletin. A statement from the SEC for investors on the affect that fees can have on investment returns.
A Look at 401K Plan Fees. A reasonably easy to read overview of the various types of fees that might be found in retirement plans.
How Do Employers 401k Mutual Fund Selections Affect Performance, Center for Retirement Research, January 2013. The report discusses how employer’s fund selection process impacts participants’ retirement savings.
The Bumpy Road to Outperformance, Vanguard, July 2013. The study looks at the performance of domestic equity funds over a 15 year period. It finds that only 18% outperform their comparative benchmarks. In addition, it reveals how 2/3′s of those funds that outperform have at least one 3 year period of under-performance.
How Expense Ratios and Star Ratios Predict Success, Morningstar, August 2010. This report discusses the importance of low cost to mutual fund performance.
A Case For Index Fund Portfolios. A comparison of the performance of portfolios of index funds to portfolios of actively managed funds.
VitaNeedle. A great story about a company where half of the employees are over 75!
Work in Retirement: Myths and Motivations. Updated information on how people view the role of work in their future. This concise, easy-to-read overview from AgeWave provides a very good description of the trend of more people looking forward to work in the latter stages of their life.