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Things You Can Control#1

October 24th, 2006 at 08:24 pm


Portfolio returns are usually pretty unpredictable. You can never forecast what return you will end up getting. So you should just throw your money anywhere and pray for the best right? Wrong. There are a few variables which the investor has full control over.

* 1st. Portfolio manager selection- If youíre investing in mutual funds you can always read up on the manager and look at his/hers past performance. Look at what stocks he/she buys and sells, what his/her past long term returns were (8+ years), and what the managers philosophy is.

* 2nd. Expense costs-This is one thing that can really make or break your return. If your return for the year was 15%, but you have a 4% expense cost then your return shrinks to 11%. Expense costs are needed because you paying for peoples educated guesses and management fees. Studies have shown that low-expense funds are more likely to outperform more expense funds overtime. So definitely shop around.

* 3rd. Taking on the risk- No risk, no reward, right? Well sometimes risk can just be dumb. I always believe in sticking with the stuff you know. If you want to be in developing markets and extremely high risk ventures, more power to you. Iíll be just fine sticking with the markets I know. For example: My mutual fund portfolio does have an international fund, but always lags behind my other funds. Just because some international markets are doing well for a few years does not mean they will always do great. Overall the S&P has always outperformed international markets long term returns.

More control factors coming up soon. Do you have any that arenít currently listed?

http://www.usatoday.com/money/perfi/columnist/waggon/2005-08... Go to main site http://www.eFIPO.com for further explanation.

6 Responses to “Things You Can Control#1”

  1. Ima saver Says:

    I really enjoy your blog, it is so informative!

  2. yummy64 Says:

    I'm interested in your statistic regarding the US vs markets in other countries. I'd be interested in reading more about this if you could point me to where I could look at this data (I'm sure someone has it posted some place) that show this I'd love to look at those numbers.

    BTW - I'm assuming you are talking Mutual funds here and not a portfolio manager who is managing your private assets.

  3. JRBeaudry Says:

    1st course would be in the book "The Four Pillars of Investing" page 30. Graph shows that more developed nations (US, Canada, Sweden, ect..) have higher returns than the average emerging market.
    2nd Link is provided in article above. *Sorry the links are provided at my main website, and when I copy and paste everything over it doesnít work*

    Like most financial planners, I still recommend putting in about 5-10% to international funds. I know they seem like the hot stocks now, but you know there will be a long and hard cooling off period.

  4. JRBeaudry Says:

    You can also look at Vanguard Total Intl Stock Index (VGTSX) and compare that to the S&P. Still outpeforms global. Again, I still think you should have some foreign stocks in your portfolio.

  5. fern Says:

    It's not true that domestic stocks always outperform global. Some years they do, some years they don't.

  6. JRBeaudry Says:

    Very true, but..... like I said long term results domestic is still winning the battle. Since inception domestic stocks have always had better performance then foreign stocks. They also carry a much larger risk depending on the country your business is located. I will rarely talk about short term results in a positive light. I am really only interested in long term results.

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