Don’t be passive when managing investment costs

As you know, gains in your stock investments are not guaranteed, even though it may feel like it if you’ve been invested in the market for the last decade.  Looking at the last five years, the S&P 500 index has increased an average of nearly 17% annually, with only minor corrections along the way.  In fact the S&P 500 returns have been so consistent that most large cap equity funds haven’t been able to beat this performance. Over a five year period only 17.6% of large cap equity funds beat the S&P Index (see exhibit 1 below).  In other words, if you had simply invested in the S&P 500 index then you would have done better than the majority of professional stock investment managers. But that’s not the end of the story. Even if you had invested in a fund that tracks the S&P 500 index, you still could have under-performed depending on the fees you paid to the investment company that managed your money.  Continue reading “Don’t be passive when managing investment costs”

Investing in picks and shovels

I don’t profess to know much about digital currencies or marijuana, but I do know something about speculative investing.  If there’s one thing I know, it’s that you’ll see history repeat itself if you’re around long enough and paying attention.  As it relates to the current digital currency mania, seen in the astronomical price increase of bitcoin, we’ve been here a few times before.  I’m certain you’re not old enough to remember the 17th century tulip bubble crash in the Netherlands or the “gold rush” in the 1800’s, but the “digital currency rush” is similar.  The rapidly rising prices and a fear-of-missing-out creates a frenzy that drives investors to bet it all (or too much) in hopes of getting rich quickly.  Continue reading “Investing in picks and shovels”