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Re: Worried about over-contributing to 401k & Roth
Old 09-21-2004, 08:55 PM   #21
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Re: Worried about over-contributing to 401k & Roth

Granted, you have some flexibility that a fund manager doesn't have, but remember:
1) with more capital, the fund manager doesn't get dinged as much by transactions fees (maybe you don't either if you have millions upon millions, but I could easily let brokerage fees get out of control).
2) The fund manager and his team spend the entire working week doing analysis and making decisions. I go to work all week (in finance, no less), and I'm not interested in spending my free time pouring over financial statements. At some point, you have to place a value on your own time.

Not to rehash the EMH debate, but my personal view is that the major financial markets in the US are fairly efficient and it's difficult to beat the market because you are competing against so many others with similar knowledge as you. For the most part, these financial instruments are priced appropriately given their risk and return. Maybe if you are really good, you can beat the market by a few percent, but how do you know it wasn't just luck, or fair compensation for higher volatility? And what about the time you spent along the way?

Maybe I'm missing out on the next Warren Buffet, but I'll stick with index funds in the broad asset classes

Quote:

I don't think that a managed mutual fund is a reasonable comparison to an individual investor. Most mutual fund managers work under a number of constraints that don't trouble me in the least. I don't have to stand ready to meet redemptions every day. I don't have to put cash into the market whenever it comes in the door. I don't have to pay a team of analysts and pay for fund infrastructure. I can change my investment approach or criteria whenever I like. Perhaps most importantly, I can take any positioin in any instrument, long or short, and do it for any length of time. I also can buy shares of the tiniest, most illiquid stock there is. I don't have to worry about making sure I look good on next quarter's relative performance chart.

Makes a big, big difference. However, you do have to understand what you are doing, otherwise you run a substantial risk of blowing yourself up.
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Re: Worried about over-contributing to 401k & Roth
Old 09-22-2004, 06:37 AM   #22
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Re: Worried about over-contributing to 401k & Roth

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Maybe I'm missing out on the next Warren Buffet, but I'll stick with index funds in the broad asset classes
Like I said, individual equities are not for everyone. Given your available time and interests, index funds make a world of sense for you.
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Re: Worried about over-contributing to 401k & Roth
Old 09-23-2004, 10:46 AM   #23
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Re: Worried about over-contributing to 401k & Roth

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Granted, you have some flexibility that a fund manager doesn't have, but remember:
1) with more capital, the fund manager doesn't get dinged as much by transactions fees (maybe you don't either if you have millions upon millions, but with only $100k I could easily let brokerage fees get out of control).
2) The fund manager and his team spend the entire working week doing analysis and making decisions. I go to work all week (in finance, no less), and I'm not interested in spending my free time pouring over financial statements. At some point, you have to place a value on your own time.
Regarding 1): With Freetrade, there are no commissions/fees on up to 20 stock trades per month- http://www.freetrade.com

Regarding 2): This is a problem for me, too--not enough time (and most times interest) to study financial statements and follow stocks/companies.

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Re: Worried about over-contributing to 401k & Roth
Old 09-24-2004, 09:47 PM   #24
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Re: Worried about over-contributing to 401k & Roth

or go ahead to pick some fee-free drips and buy those, as well as any future purchases for free. let the dividends compound and grow and if additional income is needed in the future, simply stop reinvesting the dividends and have a check sent to you. for me drips are more fun and rewarding for the conservative part of my portfolio than index funds alone (not to say i dont have index funds of course ).
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Re: Worried about over-contributing to 401k & Roth
Old 09-25-2004, 05:51 AM   #25
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Re: Worried about over-contributing to 401k & Roth

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or go ahead to pick some fee-free drips and buy those, as well as any future purchases for free. *let the dividends compound and grow and if additional income is needed in the future, simply stop reinvesting the dividends and have a check sent to you. *for me drips are more fun and rewarding for the conservative part of my portfolio than index funds alone.
Don't you find that keeping track of the cost basis in drips is a pain in the neck, especially if you have a lot of them? I don't have any drips myself, but I know people who do and they tell me it's a nightmare keeping track of all those pennies. Essentially, dripholders with 30 or 40 drips have their own mutual fund. The time they waste keeping track of their drips based on the dollar amounts doesn't justify not just going with an index fund.
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Re: Worried about over-contributing to 401k & Roth
Old 09-25-2004, 05:57 AM   #26
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Re: Worried about over-contributing to 401k & Roth

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The I-bonds were acquired over the last few years...A substantial portion of them are earning interest at 5.4% and 4.1% respectively, which is pretty good in my book for a (virtually) risk-free investment that is also tax-free.
How are I-Bonds tax-free investments?
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Re: Worried about over-contributing to 401k & Roth
Old 09-25-2004, 10:29 AM   #27
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Re: Worried about over-contributing to 401k & Roth

I-bonds are tax free at the state level and local level'
but tax deferred at the IRS level unless spent on education.

Cheers,

Charlie
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Re: Worried about over-contributing to 401k & Roth
Old 09-25-2004, 11:51 AM   #28
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Re: Worried about over-contributing to 401k & Roth

Yes, I need to update that...it should say "possibly" federal tax free but definitely federal tax deferred.

Quote:
I-bonds are tax free at the state level and local level'
but tax deferred at the IRS level unless spent on education.

Cheers,

Charlie
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Re: Worried about over-contributing to 401k & Roth
Old 09-25-2004, 02:38 PM   #29
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Re: Worried about over-contributing to 401k & Roth

DRIPS aren't a bad deal, it just takes a file for each company you own, and when you sell, just throw the numbers into a spread-sheet and out comes your cost basis. It IS managing your own mutual fund, and while it's more work it's also more fun for some people. I'd imagine a lot of the people that would take the time to read and post on here think more about their money (or their investment direction rather) than the general population, and would enjoy being proactive in their investment process. I know I certanly am.
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Re: Worried about over-contributing to 401k & Roth
Old 09-25-2004, 04:25 PM   #30
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Re: Worried about over-contributing to 401k & Roth

Yep - two file cabinets, a spreadsheet, 40 DRIPs over the past 15 years. So far it's still fun.

I notice those dirty birds at Wellington, Vanguard Value Index, Wellesley and to a lesser extent. Dodge and Cox - own a lot ot the stocks I do - in their top ten -

Hmmmm - are they copying me - heh, heh, heh - or vice versa?

15% for the above - the other 85% is in balanced index and includes about 10% of the 85% in REIT INDEX. All of which I haven't touched since 1998.

My quest for the 'value premium' and/or the holy grail type stock is confined to the 15%.

But - also have some hot stocks like Con ED, National Fuel, Washington REIT, Eli Lilly, Aqua America, Excelon, JM Smucker - the real swingers.
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