Mutual Fund Selection Made Simple By Indexing!

Non-indexed mutual funds try to keep it secret that actively managed mutual very funds rarely do better stock market indexes. The higher fees of the managed funds really make it hard for these funds to out compete indexed funds. Smart financial journalists occasionally rat out fund managers for not educating the public in this regard. When this happens the mutual fund managers make a feeble attempt at self defense by pointing to something called the 5% rule.

This rule says that for a fund to market itself as diversified it cannot have more than 5% of 75% of the funds total assets in a single stock. In other words, a fund can have 25% of its holdings in a single stock, but the remaining 75% must follow the 5% rule. The 5% rule was created by the Investment Company Act Requirement. Fund managers claim that this hampers their performance instead of admitting that they are in the business just to clip you for high fees while the mutual fund under-performs the general market.

The truth is that the big killer is the herd mentality of active fund managers. They follow each other around buying and selling the same junk. They flock to the same familiar companies and often overlook the new, obscure companies that show great promise. They take great comfort in knowing that, even if their fund misses out on a great opportunity, most of the others in its group will too. They also know that they can pull their huge fees out during the whole time your retirement savings are parked in their fund. Over the years they spend a lot of marketing money to make you think that they actually care.

That is certainly not the attitude I want the manager of my retirement to have! You should be asking your self why the mutual funds don't just mimic the same portfolio stock composition as a major index like the S&P 500 stock market index. Well, some have and those that are indexed out perform actively managed funds at the minimum management cost. For this reason I strongly recommend that if you can only buy mutual funds as in the case of the 401(k) then restrict your purchases to indexed funds like the Vanguard 500 (VFINX).

ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., a.k.a. "The Wallet Doctor", is a successful futures trader, real estate investor, and stock investor. Dr. Brown holds a Ph.D. in finance from the University of South Carolina. His 1998 articles in Technical Analysis of Stocks and Commodities were prophetic in predicting an impending stock market crash. He has helped many people become profitable investors by teaching them to look out over many years to spot stocks that are low and primed for rise in the new bull market. His second article met with approval by Dr. Bob Shiller of Yale University. Dr. Shiller is the economist that Alan Greenspan most highly regards who coined the term "Irrational Exuberance." In 1998 he shouted to the world to "get out" of the stock market but now he is shouting to everyone that it is time to "get in!" The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing. Visit Dr. Brown's site at http://www.BonanzaBase.com or sign up for his investment tips at http://www.WalletDoctor.com

MORE RESOURCES:

Vanguard#39;s Bogle on surviving the bear market: Get back to ... - MarketWatch

Treasury Weighs Investing In Banks - Washington Post

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://news.google.com/news/url?sa=Tct=us/1i-0fd=Rurl=http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3161132/Financial-crisis-Hank-Paulson-warns-that-more-banks-and-businesses-will-fail.htmlcid=1255629985ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNH8ShQgQciFx4qLkDuHDrXHZzkA2wimg src=http://news.google.com/news?imgefp=JHvOANJ90RkJimgurl=www.telegraph.co.uk/telegraph/multimedia/archive/01004/paulson-460_1004044c.jpg width=80 height=50 alt= border=1brfont size=-2Telegraph.co.uk/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/1-0fd=Rurl=http://www.washingtonpost.com/wp-dyn/content/article/2008/10/09/AR2008100901520.html%3Ftid%3Dinformboxcid=1255629985ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNGALa7VcfHVKgwjpNTOFUDseAa2_gTreasury Weighs bInvesting/b In Banks/abrfont size=-1font color=#6f6f6fWashington Post,nbsp;United Statesnbsp;-/font nobr11 hours ago/nobr/fontbrfont size=-1quot;It was a part of the rescue package that the president supported, and it gives the Treasury secretary a range of possibilities, and binvesting/b in banks b.../b/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/1-1fd=Rurl=http://www.news.com.au/story/0,23599,24480362-1702,00.htmlcid=1255629985ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNFf_D_q-LsVh62IZG2AcNr88GZBXgPaulson reveals bank rescue plan/a font size=-1 color=#6f6f6fnobrNEWS.com.au/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/1-2fd=Rurl=http://www.time.com/time/business/article/0,8599,1848882,00.htmlcid=1255629985ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNHW3BLJNw9iRq4TWgkWvJxMI1UKpwWill Paulson#39;s Bank Plan Finally Unfreeze Credit?/a font size=-1 color=#6f6f6fnobrTIME/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/1-3fd=Rurl=http://afp.google.com/article/ALeqM5iV1lfMZTsZjPW1-zNi1UhsdG-jNQcid=1255629985ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNGpU6BSDDxOnjGMb07ytVSVzMO_vgAfter Britain, US eyes direct capital injections to troubled banks/a font size=-1 color=#6f6f6fnobrAFP/nobr/font/fontbrfont size=-1 class=pa href=http://news.google.com/news/url?sa=Tct=us/1-4fd=Rurl=http://www.domain-b.com/finance/banks/20081011_paulson.htmlcid=1255629985ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNG0CsQaRvHNp2dtCHb-ovS_bm0Qjgnobrdomain-B/nobr/anbsp;- a href=http://news.google.com/news/url?sa=Tct=us/1-5fd=Rurl=http://www.nytimes.com/2008/10/10/opinion/10fri1.htmlcid=1255629985ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNGOHgNZ1VMbL5nmaP3LL_PGSZ7NxAnobrNew York Times/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1255629985hl=ennobrall 2,023 news articles/nobr/a/font/div/font/td/tr/table

Investing Like Buffett - New York Times

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://news.google.com/news/url?sa=Tct=us/2i-0fd=Rurl=http://www.cpifinancial.net/v2/News.aspx%3Fv%3D1%26aid%3D1183%26sec%3DInvestment%2520Bankingcid=1255356738ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNGH82wtf44kWIWjq9CJHp6AgKXaiAimg src=http://news.google.com/news?imgefp=yAe_NkNDULMJimgurl=www.cpifinancial.net/v2/images/news/im10457AM.jpg width=67 height=80 alt= border=1brfont size=-2CPI Financial/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/2-0fd=Rurl=http://www.nytimes.com/2008/10/11/business/11values.html%3Fref%3Dbusinesscid=1255356738ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNFhmJwECQF7gWXWbHy_hhBy-5KhzQbInvesting/b Like Buffett/abrfont size=-1font color=#6f6f6fNew York Times,nbsp;United Statesnbsp;-/font nobr9 hours ago/nobr/fontbrfont size=-1It’s easy in theory: Mr. Buffett accumulated his fortune by binvesting/b only in businesses he understands, buying shares when they were cheap and holding them b.../b/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/2-1fd=Rurl=http://www.usatoday.com/money/economy/2008-10-01-1678224584_x.htmcid=1255356738ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNGfixd9-Bdu5UB3ORSauqpRtIvsMQBuffett#39;s company to buy $3B of GE preferred stock/a font size=-1 color=#6f6f6fnobrUSA Today/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/2-2fd=Rurl=http://www.rttnews.com/Content/TopStories.aspx%3FNode%3DB1%26Id%3D735234%26Category%3DTop%2520Storiescid=1255356738ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNHk_EJ6IBD_N2mWKsvQlr3TLUq2jQGoldman Sachs#39; GS Loan Partners I raises $10.5 Bln/a font size=-1 color=#6f6f6fnobrRTT News/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/2-3fd=Rurl=http://newsticker.welt.de/index.php%3Fchannel%3Dfin%26module%3Dsmarthouse%26id%3D790397cid=1255356738ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNGQlq1Xy7pJJOaQvHadd2-46MKuAQGoldman Sachs Closes GS Loan Partners I with $10.5 Billion/a font size=-1 color=#6f6f6fnobrWELT ONLINE/nobr/font/fontbrfont size=-1 class=pa href=http://news.google.com/news/url?sa=Tct=us/2-4fd=Rurl=http://www.msnbc.msn.com/id/27067432/cid=1255356738ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNE5eHMSXjFcYyKIL4GptA0T7gxq6QnobrMSNBC/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1255356738hl=ennobrall 46 news articles/nobr/a/font/div/font/td/tr/table

Invesco PowerShares Announces Name Change for PowerShares NextQ ... - MarketWatch

Keep investing in Maine, expert urges at summit - Bangor Daily News

The Wallet covers the latest personal finance and investing news ... - Wall Street Journal Blogs

Value Investing 101: Dillard#39;s - TheStreet.com

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/6-0fd=Rurl=http://www.thestreet.com/story/10439912/1/value-investing-101-dillards.html%3Fpuc%3Dgooglen%26cm_ven%3DGOOGLEN%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNEuqJ8mpOrxluShmY4158wwAiNo3gValue bInvesting/b 101: Dillard#39;s/abrfont size=-1font color=#6f6f6fTheStreet.comnbsp;-/font nobr23 hours ago/nobr/fontbrfont size=-1So as the financial sector continues to scramble for survival, can Bank of America#39;s purchase of Merrill Lynch, Buffett#39;s binvestment/b in Goldman Sachs and GE b.../b/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/6-1fd=Rurl=http://www.thestreet.com/story/10441111/1/the-pitfalls-of-playing-1k.html%3Fpuc%3Dgooglefi%26cm_ven%3DGOOGLEFI%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNHm-ridH0EuHWwEUEzRMuyIRKhX1wThe Pitfalls of Playing $1K/a font size=-1 color=#6f6f6fnobrTheStreet.com/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/6-2fd=Rurl=http://www.thestreet.com/story/10441019/1/realmoney-winning-calls-keep-coming.html%3Fpuc%3Dgooglefi%26cm_ven%3DGOOGLEFI%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNHsetK0mcNcV-f4YcJa_-cNRmTxdgRealMoney: Winning Calls Keep Coming/a font size=-1 color=#6f6f6fnobrTheStreet.com/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/6-3fd=Rurl=http://www.thestreet.com/story/10441701/1/five-dumbest-things-on-wall-street-oct-10.html%3Fpuc%3Dgooglefi%26cm_ven%3DGOOGLEFI%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNEnuhLmtpDxBVdL0monoAu6AbWgKAFive Dumbest Things on Wall Street: Oct. 10/a font size=-1 color=#6f6f6fnobrTheStreet.com/nobr/font/fontbrfont size=-1 class=pa href=http://news.google.com/news/url?sa=Tct=us/6-4fd=Rurl=http://www.thestreet.com/story/10441008/1/lessons-from-a-failed-investment.html%3Fpuc%3Dgooglefi%26cm_ven%3DGOOGLEFI%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNH8xhXZAxt2vtB1V4OCUEGSPRniQQnobrTheStreet.com/nobr/anbsp;- a href=http://news.google.com/news/url?sa=Tct=us/6-5fd=Rurl=http://www.thestreet.com/story/10441167/1/mad-money-lightning-round-sell-gamestop.html%3Fpuc%3Dgooglefi%26cm_ven%3DGOOGLEFI%26cm_cat%3DFREE%26cm_ite%3DNAcid=1255216354ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNEVuiXEIgCRre7vtFrIZULhTVJxDgnobrTheStreet.com/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1255216354hl=ennobrall 65 news articles/nobr/a/font/div/font/td/tr/table

On Investing: What you should know about Market corrections... - Valley News Today

table border=0 width= valign=top cellpadding=2 cellspacing=7trtd width=80 align=center valign=topfont style=font-size:85%;font-family:arial,sans-serifa href=http://news.google.com/news/url?sa=Tct=us/7i-0fd=Rurl=http://www.nytimes.com/2008/10/11/business/11markets.html%3Fbl%26ex%3D1223870400%26en%3Da2b95ae23454dd8c%26ei%3D5087%250Acid=1256362445ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNFC_UNQQv8E_PUVMXc3oCvoMGmhUQimg src=http://news.google.com/news?imgefp=EVrZQwsaMZMJimgurl=graphics8.nytimes.com/images/2008/10/11/business/11markets.600.jpg width=80 height=40 alt= border=1brfont size=-2New York Times/font/a/font/tdtd valign=top class=jfont style=font-size:85%;font-family:arial,sans-serifbrdiv style=padding-top:0.8em;img alt= height=1 width=1/divdiv class=lha href=http://news.google.com/news/url?sa=Tct=us/7-0fd=Rurl=http://www.valleynewstoday.com/site/news.cfm%3Fnewsid%3D20159517%26BRD%3D2703%26PAG%3D461%26dept_id%3D555139%26rfi%3D6cid=1256362445ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNG6HEyN4K1vHZtJlR6wxcXoT_9i-wOn bInvesting/b: What you should know about Market corrections.../abrfont size=-1font color=#6f6f6fValley News Today,nbsp;IAnbsp;-/font nobr20 hours ago/nobr/fontbrfont size=-1While historically the stock market has spent more time being bullish than bearish (which is why stocks have been considered a good binvestment/b over the b.../b/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/7-1fd=Rurl=http://www.youtube.com/watch%3Fv%3D7vEEspTIs6wcid=1256362445ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNG6if6DF6HJiduf3Y69eB6wzhrvZAVideo: US Stocks Extend Huge Losses/a font size=-1 color=#6f6f6fnobrAssociatedPress/nobr/fontobject width=448 height=356param name=movie value=http://www.youtube.com/v/7vEEspTIs6w/paramparam name=wmode value=transparent/paramembed src=http://www.youtube.com/v/7vEEspTIs6wtype=application/x-shockwave-flashwmode=transparentwidth=448height=356/embed/objectbr/fontfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/7-2fd=Rurl=http://www.seacoastonline.com/articles/20081009-BIZ-810090344cid=1256362445ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNFNJT_19TNap0cF8IHJvZSJJIe1AwStocks can provide income as well as growth/a font size=-1 color=#6f6f6fnobrPortsmouth Herald News/nobr/font/fontbrfont size=-1a href=http://news.google.com/news/url?sa=Tct=us/7-3fd=Rurl=http://www.bworldonline.com/BW101108/content.php%3Fid%3D131cid=1256362445ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNEVVF9uO-9Yy3BShmdvNA8NYtjv4QThe Stock Market/a font size=-1 color=#6f6f6fnobrBusinessWorld Online/nobr/font/fontbrfont size=-1 class=pa href=http://news.google.com/news/url?sa=Tct=us/7-4fd=Rurl=http://www.fool.co.uk/news/investing/2008/10/07/i-never-thought-it-would-get-this-bad.aspxcid=1256362445ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNFLZY5qajps01mOu_U0yiRbDxnnEwnobrMotley Fool UK/nobr/anbsp;- a href=http://news.google.com/news/url?sa=Tct=us/7-5fd=Rurl=http://www.kiplinger.com/features/archives/2008/10/knight-kiplinger-on-buying-stocks-now.htmlcid=1256362445ei=5HzwSIeTE6T2ygTOjvjJBwusg=AFQjCNG-MwJWcrxoNfrthhnIe6WuIZ_rHQnobrKiplinger.com/nobr/a/fontbr/font class=p size=-1a class=p href=http://news.google.com/news?sourceid=navclientie=ISO-8859-1rls=GGLG,GGLG:2005-22,GGLG:enncl=1256362445hl=ennobrall 3,014 news articles/nobr/a/font/div/font/td/tr/table

Don#39;t be Fooled by These Investing Misconceptions - Cabot Wealth Advisory

IRA investing: get on the bull ride! - YourHub.com

Investing - Google News

RELATED ARTICLES

Angels, Are They Real?
They're real, but few survive. High risk investing is dangerous to your bank balance.

Evaluating A Money Manager
Scams and frauds are designed to take your money through false promises and phony�claims. Money management is supposedly designed to increase your net worth.

The High Price of Oil
In less than four years, the price of oil has risen about 300%, or over $50 a barrel. The Light Crude Continuous Contract (of oil futures) hit an all-time high at $67.

What My Horse Had For Breakfast
Let's see, he had some oats, fresh alfalfa and his vitamins. I know from the mixture that is great food and he will win the seventh race this afternoon.

How to Buy to Let
Find out everything you need to know about buy to let. Learn what to buy, where to buy and what not to buy.

Out-Of-State Investors Check List of Questions
The following lists of questions are suggested questions to ask before you plan to purchase residential real estate outside of your neighborhood.It's probably best to speak with at least three licensed real estate sales professionals and three property managers in the area.

An Old Dividend Stock Investment Idea, for a New Generation
Death and taxes! The certainties of life! And then, of course, there are the mortgage payments, the utility bills, phone bills, the car payments and thirsty automobiles. Add that to the grocery and clothing bills, and there appears to be more then just death and taxes as certainties of life.

Finding a Broker
"Hey Joe! I need help finding a broker. I notice that discount commission rates are pretty much the same.

June 2005: Weather Forecasts for Weather Traders
If Johannes Kepler, the renowned 17th century astronomer and discoverer of the planetary laws of motion, could speak from the heavenlies, he might have a few words of wisdom to share with the National Weather Service. Although Kepler's name is not normally associated with meteorology, he was quite the weather forecaster in his day.

Hedge Fund 101 - Make Money with Hedge Funds
Investors are always looking for the best investments that will yield the most profit. Any investor who can afford the extra cost should consider investing in Hedge Funds.

Going Against the Conventional Investment Wisdom
First of all, I want to give everyone the disclaimer that I am not a registered financial advisor and I don't play one on TV. Therefore, I cannot legally provide financial advice and I will not do so.

A Safe Port For Mutual Funds But Not You!
Soft dollars, a form of legal kickback, is a sly way you can get ripped off by mutual fund managers. Full service brokers give these kickbacks to non-indexed mutual funds in the form of a "rebate" to purchase research, software, and even computer equipment.

Creating a Financial Future--Putting Your Plan Into Action Part 2
Real Estate can be a useful tool for investing. The simplest real estate investment is not truly an investment, but a cost-reduction - that is owning your own home.

Success Trading: Some Basic Terminology for New Traders
The world of trading can get very complex because the financial markets are complex. There thousands and thousands of successful traders out there today.

Easily Finding A Good Stock
There is a tremendous amount of software,complicated high priced newsletters, radio andTV stock pickers and Internet web sites thatwill help you find a stock that is going to makeyou rich.The problem is you don't know if this is talkor are these gurus putting their own money wheretheir mouth is.

Coca-Cola - A Value Stock?
There has been much talk lately about Coca-Cola and its potential as a value stock - as it now spots a dividend yield of 2.6% (which is the highest dividend yield since the late 1980s) and a P/E or less than 21 - right at the bottom of its five-year low.

What Is A Fair Market Value, Really? If Youre Going To Trade, Be Sure Its Worth It!
I've been involved in online trading, specifically with stock and index options, for several years. In this time, I've spent a great deal of time thinking about value and the fact that anything, be it a stock or currency or even a house, is worth exactly whatever someone else will pay for it.

How Eating Bitumen Made Me a Better Stock Trader
Stock market trading is a fascinating activity.There are so many layers to it.

The Myth of the Earnings Yield
AbstractA very slim minority of firms distribute dividends. This truism has revolutionary implications.

Critical Options Investing Tip When Trading Naked Calls and Puts
An option is a derivative trading product that is best used by investors as a hedging tool providing investing profit protection and profit enhancement. Although it is a powerful risk management tool, it can also be used effectively as a stand-alone trading vehicle.