This is just peachy

[Spiffor]

Well, since 401k doesn't seem to work, why not have a proper social security then ? Like 401k, it is a mere redistribution of money. 401k proves to be even more inefficient as a redistribution method than the old pension system, so it is about time to get rid of it now

[Dinner]

The 401k isn't designed to redistribute anything to anyone. It is designed to allow people to volintarially save money for retirenment without paying taxes on it.

Boris: I did need to chill out after the first post but I'm better now. Anyway I guess I'm one of those big picture guys who's always trying to do long term planning. My goal is long term financial independence and I'm feeling like I'm behind where I should be to meet that goal.

[Spiffor]

It is a redistribution method :
the money you put in a 401k is not put in a vault for 30 years. It is immediately injected in today's economy, and it gives you the right to take from tomorrow's economy. In the end, you'll get some money from tomorrow's economy just as the old retirment system did.
Except that this redistribution suffers from the crookness of the market rather than the inefficiency of bureaucracy.

There's a reason why capitalization systems are much less fashionable in countries currently redefining their retirement systems...

[chequita guevara]

Originally posted by Jaguar Warrior
Has anyone ever said "this is just peachy" in a non-sarcastic way?

Yes. I was talking about a peach milkshake. Mmmmmmmm, peach milkshakes.

[Boris Godunov]

Originally posted by Oerdin
The 401k isn't designed to redistribute anything to anyone. It is designed to allow people to volintarially save money for retirenment without paying taxes on it.

Boris: I did need to chill out after the first post but I'm better now. Anyway I guess I'm one of those big picture guys who's always trying to do long term planning. My goal is long term financial independence and I'm feeling like I'm behind where I should be to meet that goal.

It's precisely because 401(k)s are longterm that you need not worry so much. It might make you do something rash.

You are 40 years from retirement. Think of where the DJIA was 40 years ago, compared to today.

[Dinner]

Please tell me why it is redistribution again. I honestly didn't follow that. The 401k allows me to take my money and invest it in securities without paying taxes of any kind provided I agree not to touch it (with a few exceptions) until I am old enough to retire. In essience it is a nontaxable retirement savings account which never recieves any government money.

I do get a certain percentage of funds from the company if I stay with them long enough to be vested but that is like a profit sharing bonus more then a government income redistribution.

[Spiffor]

"Redistribution" doesn't necessarily mean "government-mediated redistribution". It just means that, when you'll be old, you'll take money from 2040's economy, and not from 2000's economy.

Sure, you made this money in the 2000', but it has been invested almost immediately in the economy when you put it at the bank or at the stock market. As such, you give your wealth away and have a right to take it back in the future, to take it back on the future's economy.
To put it bluntly, you'll suck 2040's economy without making money in the 2040'. It's a form of redistribution, even if the State isn't involved.

[Dinner]

I'm going to have to disagree with you Spiffor. Nothing has been taken away from 2040's economy since the money never changed hands. I have my money and I'm choicing to do one thing with my money and if in the future I choice to do something else with my money (like spend it) then I still haven't taken anything.

The only way you can see it other wise is if you consider every single market transaction to be redistribution which is possible but then we are no longer talking about the common English term known as "redistribution" since we have defined it to mean something else.
What your claiming seems to me like claiming that by choicing to by clothes instead of vacations I am redistributing income that really should have gone to vacation companies. The vacation companies never had it so why would I have taken from them? Also if I buy a house as an investment, with the thought that I'd sell it later at a higher price (since the amount of land stays the same but the population & demand keeps going up) then am I taking from future generations? Nope, I have an asset which I can do with as I please. No redistribution is envolved.

[Inverse Icarus]

Originally posted by Cruddy
You lucky sod. Dog food? I dream of beans on toast when I'm munching away on gravel.

beans on toast? god, next you'll be putting them on eggs.

[Dinner]

I asked my aunt about index funds and this is what she said:

Index fund just buy the broad market like the S&P 500 and pay a fee to do so. Effectively they buy every stock in the index in proportion to the weighting each stock is of the index. You just take the market ride, upside and down, with no analysis or stock picking skill for your fees.
Personally, I think one of the big benefits of a fund manager is his ability to soften the downside for you. Check out the performance of some of the funds you have chosen and you will see that they have performed
better than index over the last three years. If you were in the index funds this would never be the case. In a market 'bubble' like we saw in the late '90s most managers will not do as well as their relative style
index because they recognize the overaluation. This is the period when index funds do well.

Anyone agree or disagree?

[Q Classic]

hey oerdin, if you disable yourself now, at least you'll get social security...

as it stands, by the time you're retired (if you're like me, and under 30), odds are social security will be bankrupt/gone, so all your taxes that went to it were a lousy investment.

[Harry Seldon]

I disagree with your aunt. Most managed funds underperform. Sure the index funds lost money the last three years. The DJIA dropped 6,000 points. It will go back up though and it offers a more consistent return. The Motley Fool has a good comparison at www.fool.com if you want to check it out.

[JohnT]

Originally posted by Oerdin
I asked my aunt about index funds and this is what she said:


Anyone agree or disagree?

Let me requote:

Personally, I think one of the big benefits of a fund manager is his ability to soften the downside for you. Check out the performance of some of the funds you have chosen and you will see that they have performed
better than index over the last three years.

In regards to your aunt, please note that what you are purchasing are not investments, but rather gambles that this particular money manager can beat the market. You are betting on him, not the market, and if you are comfortable with that strategy, fine.

But for only a 3 year period? Ask her what this guy's record is over 10 years, or 20 years.

[Japher]

I think you aunt is as right as anyone else will get (but she still has issues). My dad swares on mutual fund. He owns like 3 stocks, 10 funds, and 2 indexes.

The one that has made him the most is one of the stocks (a bank stock). His funds always under perform the market, yet his indices always perform at the market, at least you can be sure of that.

Index fund just buy the broad market like the S&P 500 and pay a fee to do so. Effectively they buy every stock in the index in proportion to the weighting each stock is of the index. You just take the market ride, upside and down, with no analysis or stock picking skill for your fees.

She might be confused with other spiders here, but broad index funds generally only have the normal fees associated with trading of any vehicle. While S&P, DOW, Russel 2000, etc. have to change quarterly as stocks enter and leave the funds holdings, thus giving you a turn over. Yet, stock that reside in these indeces rarely change, and you can bet on a less than 1% fee per year.

Also, no amount of analysis can really tell you what the future will hold. A small amount, which you canb and should do yourself, will tell if the company is about to fold. Personally, I don't like anyone to tell me what to buy, or even worse buy it without my permission! Which is exactly what fund managers do. If you think you are getting anything out of their analysis ask them to see it... You might be surprised at how long it takes them to produce it.

On the same note, stock picking skills?!!! What are those?! My stupid broker has just as much chance as I do at picking a winner. I just don't trust them enough. They have hundreds of people giving them money, why would they value you over someone else? You let your accountant do your taxes without knowing something about accounting, chances are you will end up with an awful accountant... Educate yourself enough to learn what it is you need to feel secure in your investments.

Personally, I think one of the big benefits of a fund manager is his ability to soften the downside for you. Check out the performance of some of the funds you have chosen and you will see that they have performed better than index over the last three years.

That ain't softening the downside, that is one good year! Or, during the tech bubble, 5 good years. A fund manager is good for nothing...

If you were in the index funds this would never be the case. In a market 'bubble' like we saw in the late '90s most managers will not do as well as their relative style index because they recognize the overaluation. This is the period when index funds do well.

Manage your own funds...

[Dinner]

In essience aren't we paying a fund manager to closely watch the market and to key in to trends which we ourselves are to busy to do?