Value Investing & Index Funds (bond, IRA, mutual funds, margin)
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I am currently in school and won't finish for another 3 years. I have recently started to learn about investing and am fascinated by it. Once I start working, I want to invest in index funds (Vanguard 500) and then start learning more about value investing and using fundamental analysis to do that. I'm still a newbie (infant stages) to investing.
Does anyone still value invest? I want to spend time researching companies but not sure how much time it will take on top of a full time job. 5 hours a week? 10 hours a week?
Also what are the average returns per year (if there are any) when it comes to value investing? Cause I'd imagine if it's around about 12%, wouldn't you be better off just using an index fund and saving yourself all that time and trouble analyzing companies financial statements? Since index funds historically return around 10%. Thank you in advance, this is a great forum filled with smart, helpful, nice people!
I am currently in school and won't finish for another 3 years. I have recently started to learn about investing and am fascinated by it. Once I start working, I want to invest in index funds (Vanguard 500) and then start learning more about value investing and using fundamental analysis to do that. I'm still a newbie (infant stages) to investing.
Does anyone still value invest? I want to spend time researching companies but not sure how much time it will take on top of a full time job. 5 hours a week? 10 hours a week?
Also what are the average returns per year (if there are any) when it comes to value investing? Cause I'd imagine if it's around about 12%, wouldn't you be better off just using an index fund and saving yourself all that time and trouble analyzing companies financial statements? Since index funds historically return around 10%. Thank you in advance, this is a great forum filled with smart, helpful, nice people!
-Rich
Rich, welcome to the forum.
I do use vanguard funds. I also think that you are somewhat off if you think you think you should be earning 12% annually.....that's a bit steep for a projection. Always be more conservative in your future estimates (which will force you to save more)!
Have you heard of bogleheads.org? Its a website that gives investing advice inspired by the great Jack Bogle. He even posts every once in a while! I'd think you find what you are looking for over there. There are many index and value investors over there.
I am currently in school and won't finish for another 3 years. I have recently started to learn about investing and am fascinated by it. Once I start working, I want to invest in index funds (Vanguard 500) and then start learning more about value investing and using fundamental analysis to do that. I'm still a newbie (infant stages) to investing.
Does anyone still value invest? I want to spend time researching companies but not sure how much time it will take on top of a full time job. 5 hours a week? 10 hours a week?
Also what are the average returns per year (if there are any) when it comes to value investing? Cause I'd imagine if it's around about 12%, wouldn't you be better off just using an index fund and saving yourself all that time and trouble analyzing companies financial statements? Since index funds historically return around 10%. Thank you in advance, this is a great forum filled with smart, helpful, nice people!
-Rich
Watch Mad Money, take it with a grain of salt, but it's a somewhat entertaining way to learn. Cramer likes high growth stocks, which is the same as me.
You'll never feel completely ready to start investing. It's good to start early because it will take time before your account builds up. I've always been interested in individual stocks vs mutual funds, ETFs etc. I like doing the research myself.
I started out trading really young when I was 8 years old. I started getting serious in high school. I started with about $2,000 in 2004 and now I have $150,000. I've contributed around $20,000 into that amount. Once you understand investing and build your balance to around $30,000 then start learning about options. The main thing is to start young because it will take awhile to build up your account.
Think about it... 20% of $2,000 is only $400, but 20% of $150,000 is $30,000. Research your stock(s), set a target price, monitor news daily, keep it until it hits your target price or sell it if negative major news comes out. I love investing in high growth stocks.
10 things to look for in a high growth stock:
1. Clear Growth Path (do they have clear/logical plans for future growth)
2. Market for Products (is the market big enough to support this growth)
3. Competition (will they stay competitive)
4. Capital to Shareholders (do they reinvest their profits back into the company or issue dividends)
5. International Expansion (do they have the ability or desire to expand overseas)
6. Balance Sheet Strength (do they have their financial house in order)
7. Is it Expensive (is the stock overvalued based on P/E ratio etc)
8. Strong Management (are they capable enough to successfully execute their growth plans)
9. Secular Growth (will their market show growth long-term)
10. Margin Growth (is there operating margin stable or growing)
If you are going to buy value buy individual stocks or maybe a mutual fund with smaller cap value. Stocks that are cheap usually have a reason for it. When you put 100s of them together you lump the cheap for a reason stocks in with the stocks which could reward you which is just a formula for mediocre returns. If you want to be conservative and hands off buy into dividend stocks where you might get the 8-9% In dividends alone as long as you pick out stocks which fairly consistently raise dividends over time.
You could consider a good value fund with a low expense ratio. A good fund manager is doing the work for you and not acting on emotion. If you feel the need to dabble in stock picking make that a small part of your portfolio, at least until you get a handle on what you are doing.
Only a savant is going to outperform seasoned professionals. And people always brag about their successes and never their failures. Keep that in mind.
many who brag also committ so little of their assets to investing that even if they found the next apple it wouldnt effect their assets much.
many just like the bragging rights of their success but when figured into their whole nest egg their overall performance is quite poor. my buddy used to buy 2 or 3 stocks and rave about how they are up. in the mean time 90% of his money was dying on the vine in cd's and money markets.
even the most conservative model portfolio using funds that included working with all his money would have yielded far greater returns than all his fiddling around with a few issues.
worrying about bench marking a piece of your assets thats invested in equities against the s&p 500 or wilshire to me is just meaningless if the rest of your money is doing poorly and your overall return can be beaten by buying a cd and worry free treasury bond combo.
i gauge my performance by including just about every penny i have taken as a whole. some is in cash ,some bonds ,stock,gold,reits etc but all my assets in total are judged as if its one big portfolio.
my bench mark for my performance now is plain ole banks and treasury bonds . each year i gauge myself by saying " if i just called it a day and bought long term treasury bonds and cd's with all my money would my return with my portfolo be higher or lower than it is with all my money being in my portffolio.
if my portfolio is performing and beating that bond/cd i consider it a good year.
the very conservative portfolio i follow is up around 4-5% this year but that includes just about every cent of money in that number that i have except my bill money. my model is about 30% in equities
with retirement right around the corner whenever we choose the cash positions are quite high.so with the long term treasury bond fund at 3.21% and cd's around 1% i consider running a portfolio worth it and im happy with performance..
Last edited by mathjak107; 04-13-2012 at 04:53 AM..
Forget about value investing. Focus entirley on indexing. At your age, I would remain 100% equities, particularly in 401k and IRA. You only need two funds:
Vanguard Total Stock Market Index
Vanguard Total International Stock Index
If you are more adventurous, you might consider the Vanguard Emerging Market Index, just be aware that VTISI contains about 25% emerging markets, so adjust accordingly.
Once you reach 10k in these accounts, convert to Admiral shares.
Once you reach 40-45, that's when I'd start moving into bonds.
The key to all of this is to start early and remain consistent. And keep expenses as low as possible. That's why indexing with Vanguard works so beautifully.
stout boy you have quite alot to learn yet about age based investing . investing should never count heavily on someones age .
its about pucker factor,goals for your risk level , needs and wants and what the big picture looks like.
as i said before a 20 year old who bails and loses money at every big drop dosnt do himself any good by having a high equity position. 2008-2009 saw folks panic and lose more money than they ever expected they would because they took more risk then let them sleep at night.
a 65 year old still has money they wont need to eat with for 30 years. if their pucker factor is in their bounds there is no reason they cant stay in equities. we never ever even had a 15 year period where stocks didnt break new highs so you can sell without sustaining a loss to refill cash for living..
as far as moving to bonds , thats whats wrong with age investing and target date funds which work by age, they dont look around them to see the risks involved.
moving heavily into bonds now with rates having little place else to go but up can spell heavy losses for retirees in these bond heavy target funds . moving heavy to bonds based on age is another disaster waiting to pounce as folks who thought they were avoiding risk watch their funds fall as rates go back towards normal ranges.
wall street made that mistake already by having folks invest by age and it spelled disaster in 2008-2009.
on a scale of 1 to 10 with 1 being most important i put age about 8 or 9 as criteria for laying out a portfolio.
Last edited by mathjak107; 04-13-2012 at 04:56 AM..
many who brag also committ so little of their assets to investing that even if they found the next apple it wouldnt effect their assets much.
many just like the bragging rights of their success but when figured into their whole nest egg their overall performance is quite poor. my buddy used to buy 2 or 3 stocks and rave about how they are up. in the mean time 90% of his money was dying on the vine in cd's and money markets.
even the most conservative model portfolio using funds that included working with all his money would have yielded far greater returns than all his fiddling around with a few issues.
worrying about bench marking a piece of your assets thats invested in equities against the s&p 500 or wilshire to me is just meaningless if the rest of your money is doing poorly and your overall return can be beaten by buying a cd and worry free treasury bond.
i gauge my performance by including just about every penny i have taken as a whole. some is in cash ,some bonds ,stock,gold,reits etc but all my assets in total are judged as if its one big portfolio.
my bench mark for my performance now is plain ole banks and treasury bonds . each year i gauge myself by saying " if i just called it a day and bought long term treasury bonds and cd's with all my money would my return with my portfolo be higher or lower than it is with all my money being in my portffolio.
if my portfolio is performing and beating that bond/cd i consider it a good year.
the very conservative portfolio i follow is up around 4-5% this year but that includes just about every cent of money in that number that i have except my bill money. my model is about 30% in equities
with retirement right around the corner whenever we choose the cash positions are quite high.so with the long term treasury bond fund at 3.21% and cd's around 1% i consider running a portfolio worth it and im happy with performance..
Yeah, it is sorta like gambling, some people claim to win all the time, but statistically that is impossible, so...
I agree with your thinking. I will be 62 in 9 years. I do not plan to be caught up in another serious downturn. I look at the last 3 years as a blessing. I was able to recover from the great recession and even do a little bargain hunting in the form of dollar cost averaging. The future of the economy and the markets are murky to me. I have been gradually moving to less risk and will continue to do so. I just do not see the premium in taking added risk with no time to recover. By the end of this year I will be 60/40 or even 50/50 as the signals dictate. Eking out a few percentage points above a good bond fund sounds pretty good to me at this point. And like you, I consider my total assets when I run an analysis.
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