Psst … Hot Investing Tip - Old Peak Finance

Psst … Hot Investing Tip

April 20, 2011

2011_psst

Psst … Hot Investing Tip

April 20, 2011

I’ve got a way to increase your retirement savings by 25%.

The hot tip?  “Passive” index funds.

These are mutual funds which track an index and – because they don’t pay a staff of “experts” to analyze which stocks may out-perform or to “time” the market – have lower expenses, trading costs and tax bills.  Serious studies demonstrate that, over time, “passive” funds out-perform active funds by over 1% annually.  In a 40-year working life of regular investing and saving, 1% annual out-performance would boost your savings at retirement by about 25%.  That’s huge.

Of course, just because passive investing has out-performed in the past, it may not out-perform in the future.  There are no guarantees in investing.  But the reason for their out-performance – lower fees and expenses, and a reliance on market efficiency – gives me confidence they will continue out-performing on a long-term basis.

Billions of marketing dollars are spent by mutual funds, newsletter writers and other experts every year, trying to convince you otherwise.  They want you to pay their high management fees and chase the latest hot fund.  They want you to buy at the top, sell at the bottom, trade into the next hot fund, and repeat the cycle.  They want you to ignore the fact that very few “active” funds or investors beat the market over the long run.

So it’s your decision.  You can bet on beating the market.  Or you can bet on passive index funds and their consistent out-performance.  I know where I’m putting my money.

This article is not intended to provide tax, legal, accounting, financial, or professional advice. Readers should seek advice from qualified professionals who can review their specific circumstances. Old Peak Finance endeavors to provide information that is accurate and current. However, we cannot guarantee that this information has not been outdated or otherwise rendered incorrect by new research, legislation, or other changes. Old Peak Finance has no liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website.

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