Art G,
I realize you were addressing audreyh1, but I'll give you my answers.
1. Yes, low-cost funds still have fees. They also tend to do better than high-cost fees by the difference in fees.
2. If I could set up a diversified mutual fund with less costs and not significantly more hassle than investing with, say, Vanguard, then I would. I can't.
3. Are mutual funds guaranteed? Well... sort of. They're 'guaranteed' (and here I'm speaking of index funds) to closely track the return of their target market. No guarantee on what the market will do short or long term. However, I consider that a US Wilshire 5000 fund is more guaranteed than the 'guarantee' backed by only a single company, no matter how strong it looks at the moment. That's a risk I don't think enough folks consider (this board being an exception!).
4. If the market drops at this point (since I'm still in the savings phase), I mentally go 'Yippee! A chance to buy at bargain prices!', and rebalance at the end of the year as ususal. If I were in the disbursement phase, I'd gulp, take some deep breaths, look at cutting back on some discretionary expenses, and remind myself of the reasons and research that drove me to implement the plan.
Ticktock, I'll respond to you because you seem sincere and truly interested in discussing this vs. looking to start a lynch mob. It's funny how mob mentality can take over, especially when discussing things so dear as your own money. So allow me to respond in order....
1. I'm sorry, but I challenge anyone to find a family of funds that has performed over good times and bad for a long period of time as the American Funds have. Granted, as far as managed funds go, they are relatively inexpensive, however, cheap does not equate with good. It's just that there are so many no load funds in existence that the bad ones are glossed over for the few good ones. This is known as chasing results. Check out the entire family of American Funds during up and down markets and find me any flaws.
2. Well your key word here is "hassle". You are willing to pay someone to do something for your for convenience sake. With that said, cost is just relative to results. If you go to a bad restaurant you don't return, the same thing can be true for investing. There are bad doctors and bad lawyers also. The key in anything in life is finding someone you are happy with. Personally, I'm not a Walmart kind of guy. I'll pay a little more to get quality. I don't worry that my car salesman made too much on me if I bought the car for the price I wanted to pay. And I wouldn't worry that my investment advisor made money if he achieved my goals. (BTW, to those he keep mentioning it, annuity commissions are now much lower than ever before. You just may not have been aware of them in the past.)
3. The only guarantee you have with an index fund is that it is guaranteed to underperform that index. It has no choice with the return being index minus fees. As for me, what's so great about "average"? Why would I want to buy a product based solely on it using the largest companies? I'd much rather have the human element of someone at least attempting to outperform the average. Again, compare American Funds to the averages, not even close.
4. Great, so you're still in an accumulation phase. Dollar cost averaging is king. However, first off, it's still tough for the very steadfast investor to keep adding money and watching their values drop, to a market declining by 50%. I recall when Intel started falling, the stock was around $60 and people asked me where I thought it would fall to, I told them I thought around $9, and they scoffed. Well eventually those people panicked, not right away, but when you are watching your money disappearing, it becomes very personal and nerve racking.
However, what we were talking about was not that person in accumulation phase. A living benefit if obviously far from that person's mind. What we are talking about is the person in the distribution phase of their lives. They have a set sum of money and it has to last them the rest of their lives. Go ask a majority of those people if they wouldn't be willing to give up some amount of their return for the guarantee that they never run out of money. What we are talking about realistically is about an additional 1.5% over the average mutual fund. Are you really willing to say you wouldn't pay someone 1.5% to sleep at night? Hey, if people want to slam index annuities, I can give you many reasons why that product has holes in it, however, I have reviewed these living benefits quite extensively, and for certain people they are a great source of comfort.
BTW, this is all just my own opinion. I'm certainly not trying to sell anyone anything here.
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