patrick.net

There is nothing wrong with Index funds. They outperform 70% of managed funds and are perfect choices for 401ks, which almost never let you self invest.

And if you're too lazy/busy to actively manage your other investments, well, an index isn't a bad way to go.

Personally, all my 401 and IRAs do index funds, so I don't have to think about them, and my personal investments are individual companies.

There's always the TIPS but a number of really great ETF's have been rolled out lately that are option driven creating a yield between 8 1/2 to 9 1/2%. Insert SLO @ ( ___ ). With today's transaction costs being "stopped out" and repurchasing at a later date should preclude anyone here from being stuck w/mid single digit yields, chasing longer maturities or buying junk paper.

NIA

There’s always the TIPS

Isn't TIPS indexed to the CPI aka hedonized inflation constant?

SFBB,

For company plans, I guess that's fine. I've said in the past the employees should be focused on the company while on the clock, not their 401k (other than the lunch room).

Again, indexes DON'T have expenses. They just are. Actively managed funds DO! Look, all it takes is ONE year of strong outperfomance to blow the Vangard "all things being equal" scenario out of the water. Since when have we ever seen a situation where all things were equal?

Again, indexes DON’T have expenses.

How about index adjustments?

DinOR,

I agree there are better investment strategies than index funds. I'm just saying they have quite a bit of utility to Joe Average, and even some utility to people who like to pay more attention to their investments.

I personally view fund managers like realtors. Because of how the system is set up, their best interests aren't necessarily the client's best interests. If somebody can't spend the time to do the self management, it's best to go with index funds most of the time.

I personally view fund managers like realtors. Because of how the system is set up, their best interests aren’t necessarily the client’s best interests. If somebody can’t spend the time to do the self management, it’s best to go with index funds most of the time.

I agree. Sure, some people have the ability to either (a) pick investments that beat the market; or (b) pick investment advisors who can pick investments that beat the market. But in most cases, if you don't know enough about investing to do (a) properly, you are similarly ill-equipped to do (b) properly.

DinOR,

I'm with SFBubbleBuyer. Being one of the few regular posters here who is a non-investment/securities/finance type, I can completely relate to what he's saying.

Your non-pro retail investor is not likely to be very good at active investing --at least not for a while, and there is a very significant learning curve. Index funds themselves can be "actively managed" (you can select sector-specific indexes), and VG is even offering low-cost ETFs now. It's a very nice way for the non-experts to get easy, decent returns at a low cost.

And as SFBB points out, index funds still manage to outperform active funds 70% of the time (see Fooled by Randomness & Random Walk). I may not become the next George Soros with index funds, but those are odds a regular schmuck like me can live with.

SFBB,

I can go along w/that. For the most part a lot of these guys are just going to be there "to feed the monkey" shortly anyway. As technology advances the "active fund mgr." will become something of a dinosaur. It just blows me away that no-load/index guys always fall back on the same tired hypothetical and no one ever challenges it.

From what I hear about Japan's recession, toilet paper was the commodity in shortest supply.

Not sanitation advice.

I say invest in Wine, it's perfectly liquid and you can drink it if it loses value.

I do hope that more smart people will accept the random walk theory. The market is getting crowded.

The market may also get crowded by Random Walkers. So, watch out.

The market may also get crowded by Random Walkers.

True random walkers will gladly accept that their under-performance is an event of chance even though they deserve higher returns.

They are harmless. :)

You guys will love this story. There are just so many things worth making fun of here:

http://biz.yahoo.com/brn/070326/21330.html?.v=1&.pf=loans

So,

Rather than asking where our money should be parked, wouldn't it be wise to investigate the businesses that typically profit during economic downturns? In this case, wouldn't foreclosure companies profit? How about investing in alcohol and tobacco companies? Don't people drink a lot when they're depressed? I'm the dumbest-est-est investor around, but I'm trying to get better at it. I wonder if Anheuser-Busch increased profits during the dot-com bust and the recession in the early 90s?

As if I could ever give investment advice.

Heck, if I had a voodoo loan I would be confused. Do you know how many "moving parts" they have? :)

A very interesting point in Shiller’s Irrational Exuberrence (2nd edition) is that the post-dotcom stock market never really did correct in any sense “fully” (i.e. return to valuations based on anything resembling the fundamentals). P/E ratios are still well out of whack.

Perhaps the stock market has yet to fully correct. What if we are in the middle of a huge double top?

@Jimbo,

Nice find! According to that survey, the two most popular "plans" for 66% of option-ARM FBs is to refinance to a fixed (ha!), or "not have" the loan when it resets (i.e., sell for nice fat stacks --double-ha!). The other 34% don't have a plan, not even a delusional one.

Yeah, this is going to end well...

Stretch002,

My "next down payment" is invested in short term Muni bonds and a high yield CA muni fund, OPCAX. The post-tax return is a bit higher than a CD. A lot of the regulars here think that OPCAX is too risky, but I think that is nutty. If you are really convinced that the FDIC is going to fail you should "invest" is a cache of high quality firearms.

You can get Yugoslavian AK-47 knock offs for $350/each:

http://www.sksman.com/acces/rifles1.php

I am sure used Chinese rifles would be even cheaper. They are sure to hold their value in any economic situation.

Person,

I'm good friends w/ a lot of the folks at PowerShares so I won't comment further than to say, you could've done worse! :) Bruce Bond "defected from Nuveen and moved ops. to Wheaton, IL so now everyone gets to "reverse commute".

There's actually a distinction that should be made here. They have believed from inception that "enhanced indices" are the way to go. So rather than just throw your hands in the air and buy the whole index they're in a constant state of re-evaluation. It's a better way to go. ETF format, daily liquidity, intelligent stock selection. It's so crazy, it just might work!

@Surfer-X,

There's wine, there's wine, and then there is Kool-Aid.

You can get Yugoslavian AK-47 knock offs for $350/each:

http://caag.state.ca.us/firearms/regagunfaqs.htm#1

You can get Yugoslavian AK-47 knock offs for $350/each:

Not investment advice, legal advice, or any other kind of advice ;-)

I don't think there's a single rifle on that page that is still legal in the P.R.K. ("K" is for "Kalifornia").

Jimbo,

Put me down for two (2) "Taliban Specials"!

HARM, I remember California once declared the Walther P22 (a 22 cal pea shooter) an assault weapon because it had a threaded barrel.

Perhaps soon enough only black-powder muzzle-loaders will be legal in PRK.

Don't all you Kalifornians out there worry though. Even while she was busy disarming you, Senator Boxer managed to get a concealed gun permit and provide her own private security force with plenty of banned automatic weapons.

"What's holding you back from buying a house right now"

40% said they simply did not have enough money.

Well that certainly hasn't stopped any soon to be moguls over the last 4 years!

13% said, nothing they plan to buy.

The balance were waiting for credit scores to improve or had NO INTENTION of buying! So out of the 1,000 + surveyed by bankrate.com (the "where is the love survey") only about 130 plan to strap a board to their @$$ and take the plunge! Dark times indeed.

According to this page there are only 10 CCW permits in SF county.

http://www.packing.org/state/california/

@Peter P,

Why, how ignorant of you. Naturally, if you own a gun with a threaded barrel, this will only encourage you to attach a silencer and try to assassinate our Dear Leaders, who are protecting us from all those nasty "assault" weapons.

I'm sorry, but how could you "not know" what kind of mortgage you have?

El HARM-O, how goes it?

Peter P, still throwin up gang signs at work?

A buddy just returned from Lake County, OR (Fort Rock area) and said after a day of rattlesnake hunting they walked into to saloon and were served as long as they kept their pistols in their holsters. They didn't see a problem.

Me bad. I forget that people will take advantage of that feature and harm mice and squirrels silently.

@Mr. X, Randy H & Peter P,

So, do we have a date for the next NCAL blog party? I'd like to be there.

HARM etal. I look forward to meeting the general counsel of HARM-X Industries LLC GmbH

Last year Berkshire Hathaway had a market cap of about $130 Billion with over $35 Billion (more than 25%) in cash. I’ve got about 30% of my net worth in cash today and like Buffett I’m always looking for places to invest it where I get a good safe return.

I’ve been remodeling kitchens and bathrooms as tenants move out, but I’m happy with a lot of cash since I feel that the risk of loss due to inflation is less than the risk of loss from real estate dropping in value, stocks dropping in value or bonds dropping in value…

Peter P Says:

> You can get Yugoslavian AK-47
> knock offs for $350/each:

You can’t go wrong investing in quality firearms (that does not include most guns made in Eastern Europe)…

Most of the guns I’ve had since I was a kid have tripled in value and I could convert all of them in to cash by the end of the day…

I’m happy with a lot of cash since I feel that the risk of loss due to inflation is less than the risk of loss from real estate dropping in value, stocks dropping in value or bonds dropping in value…

FAB,

Any regular would agree with you on RE, but what makes you think that (non-RE related) stocks are necessarily primed for a big drop? I would say there's a reasonable chance of a finance/MBS/consumer-led plunge larger than what we've already seen, but are most (non-RE) stocks really that overvalued in general?

As far as Treasuries go, I don't see how you can lose here. U.S. debt is fully backed by Uncle Sam, so unless we lose the ability to print money, I can't see how that could happen. Corporate debt is of course a completely different story...