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Originally Posted by gatorfast
The first bold part I am in 100% agreement with. You can certainly find funds with much lower expense ratios as well as ETF's and individual stocks you cant get in a 401k plan.
The second part is a blanket generalization and is of course not true. All managed funds are not created equal and will vary greatly depending on the funds objectives, investments, and management.
One thing I have learned though is unless you are a sophisticated investor with the dedicated time to manage a portfolio and/or very lucky, its hard to beat the market. I have done MUCH better simply leaving my retirement money in overall stock market and/or sector funds/ETFs. I can dollar cost average in over time and dont need to worry about any individual companies which would require a watchful eye. I have used Vanguard as my brokerage for years which offers a slew of ETFs with minuscule expense ratios.
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I do not disagree if you do not have the time, find a few good ETF, but ETF is new investment vehicle, it did not exist 10 yrs ago. However, as I tell anyone it is your money and you need to educate yourself on where you are investing that money. I always hear people complaining about losing money in their retirements and they want to be upset with everyone else, I tell them they need to go no further than a mirror to find someone to blame. I am amaze at people lack of knowledge or even interest in where they are putting their money.
BYW, the problem with Managed funds, the manager could change at any moment, and the people who made it great may no longer be managing it. I was in Magellan fund in the late 80's early 90's when it was kicking ass double digit returns year after year, as luck had it I changed jobs and moved my 401K to another company and did not offer Magellan which turned out to be blessing since Peter Lynch left and the fund never performed like it did when he was there.
I have been through 3 down turns in the market, two big ones and a minor one. In the 2000 dotcom bust I did what everyone said, leave it as is and keep adding to your position (cost average down). This decline hurt since it went into the principle it was not just gains I lost (all the money I made in Magellan plus more). In 8 yrs after I never fully recovered what I lost in 2000. Come 2007/2008 when things starting going south again I did what everyone said not to do, sell off all the mutual funds and went into individual stocks.
In 4 short year I recovered everything lost from 2000 and 2008 and I am way ahead of where I would have been if I stayed the course. I have every investment I ever made since 1990 in Quicken and I know exactly what I owned back in 2000 and 2008 and I can look at the IRR or ROI and I looked at where those investment are today and what my net worth would look like if I stayed. It would not be close to where I am now.
I agree what I do takes work, but it is not as much as you think like 30 minutes a day to see what is happen in the markets and the companies I am invested in. I also work with a good broker who I can call any moment and get his inputs and make adjustments as needed.
Even ETF have bad investment mix in with the good, and the bad some time can drag down the over all good, when a company goes bad the market hammers them, stocks go down faster than they raise so I try as best I can to stay away from the bad companies. I do have a few ETF to help reduce risk, but my primary drivers are a hand full of stocks.