Tuesday, November 24, 2015

028. Investing With Private Equity Managers

The financial services industry engages the talents of individual investors who can accumulate large fortunes from the stock market by making investments through unconventional methods. These operators, often labeled as “gurus” manage portfolios by charging large fees on the investor’s investments (usually 2%) plus earning a 20% of all of the profits earned. There are over 100 private capital investors also known sometimes as “hedge” fund investors.

Large investment returns and huge personal fortunes are realized over an extended period that is measured in decades. The largest gain was accumulated by Warren Buffett because superior returns were realized over a more extended time than by the other private investors.

Should seniors try to improve their portfolio through investments with well known private managers or should they keep their funds with well managed and low-cost mutual funds?

With shorter longevity, the risky returns could be also realized through selection of superior mutual funds or ETFs while maintaining greater liquidity as well as flexibility to include IRA funds in a portfolio.

Monday, November 23, 2015

027. Investing in Commodities

Commodities and their related ETFs are free-falling. After a brief period of calm during the past few months, major commodities are sinking once again. From metals to energy to agriculture, every segment of the market remains extremely weak.The Bloomberg Spot Commodity Index, which is weighted based primarily on trading volumes, this week hit the lowest levels since the financial crisis and is down 16.2% year-to-date.

Retired seniors should avoid investment in commodity mutual funds or ETFs. None of the current offerings are attractive.


033. ETF Fees and Investment Performance

The ETF fees range down from 3.74% of the total market price of the fund while the 3-year market returns show a range that fluctuates between -55.2% and +24.16%. This can be contrasted with a steady return of 16.20% for a Vanguard ETF fund that costs only 0.05%.

032. Mutual Fund Expenses and Investment Performa

The expense ratio is the annual fee that all funds or ETFs charge their shareholders. It expresses the percentage of assets deducted each fiscal year for fund expenses, including 12b-1 fees, management fees, administrative fees, operating costs, and all other asset-based costs incurred by the fund.

Portfolio transaction fees, or brokerage costs, as well as initial or deferred sales charges are not included in the expense ratio. The expense ratio, which is deducted from the fund's average net assets, is accrued on a daily basis. The following ranking of funds and ETFs was made from a listing of over 2,000 entries.

The mutual fund fees range down from 9.79% of the total market price of the fund while the 3-year market returns show a range that fluctuates between a low value of  -21.02% and the top value of +8.94%. The choice of a mutual fund as a repository for a retiree’s savings can be seen as a gamble.

SOURCE: http://performance.morningstar.com/fund/performance-return.action?t=PAMVX&region=usa&culture=en_US