I was having a cup of coffee at the local java shop and overheard a guy talking with his friend about investing. It went something like this, “Just about the time I started making money, the system screwed me.” Wow! This is too good to mind my own business. I leaned in a little closer… [...]
Exchange-traded funds (ETFs) are mutual funds that trade on a stock exchange. For many years, all ETFs were index tracking products. The first ETF to not follow an index was launched in 2008. Today, there are 60 actively-managed ETFs listed in the U.S. and many more pending. To avoid confusion, I propose referring to index products as ETIFs and active products as ETAFs.
Good news for homeowners – your house is appreciating in value! The housing bubble (and bust) is over and prices are now poised to appreciate with the inflation rate, as they should.
What funds should you buy? Should it be index funds or exchange-traded funds, or low-cost actively managed funds, or should you pay an adviser for access to special products like DFA funds? This is an important question — but it’s often the wrong question. The products used to construct a portfolio are a function of a portfolio’s purpose. Get the purpose right first and then select the product.
Timing is everything. You’d be basking in glory today if you launched a mutual fund 10 years ago that concentrated on mid-cap stocks because they outperformed. You’d be a dunce if you did the same thing in the 1990s because they lagged. Those are the facts behind the recent outperformance of the S&P 500 Equal Weight Index (S&P 500 EWI) and the funds that follow it.