Investing in mutual funds

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I have my wifes and my roth IRA, a 529 plan, and a few misc mutual funds all invested through american funds.

For example my roth IRA returns says

Annualized since initial investment 2.19%

Year to date 8%

So if i underatand this right ive made 2.19% since ive started the fund, and made 8% this year...


Now, i always hear that you should invest in funds with good long track records that average 10-12%... where in the world do you find mutual funds that make much better rates of return?

Whats eating at me here is going through brokers and investing in american funds, it seems as though american funds dont perform at the top 10-12% rate of return.. and i would like to be able to get into finding funds that have better rates of return and having more options besides just american funds...

Where am i going with this? Do i need to look at changing to vanguard and selecting and manageing which funds my money goes in myself through vanguard? Would i have way more options then to find better performing mutual funds?

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Just buy a few Vanguard index funds and be done with it. People are wising up these days and realizing that statistically/on average, passive/index funds outperform actively managed funds.

Obviously there will be some actively managed funds that have outperformed in the past, but that could be luck and doesn't mean that they'll continue to do so.

I would recommend reading the forums at https://bogleheads.org/forum/index.php for more detailed advice.

Now, i always hear that you should invest in funds with good long track records that average 10-12%... where in the world do you find mutual funds that make much better rates of return?
Unfortunately there's always https://en.wikipedia.org/wiki/Regression_toward_the_mean and https://en.wikipedia.org/wiki/Mean_reversion_(finance)

The short answer is "nowhere" - if such thing existed, it would be bought by John Paulson, Jim Simmons and Warren Buffett and at that point fail to out-compete the market as at that size it becomes "the market".

Past performance is not an indicator of future returns. You can't look at a fund that has done well (or poorly) and assume that it will continue to do well (or poorly).

The only thing you can do yourself is invest in funds (ETFs are better than mutual funds) that have the lowest possible costs -- no front or back load fees and extremely low annual maintenance fees. I aim for 0.1% (one tenth of one percent) on average.

https://www.bogleheads.org/wiki/Lazy_Portfolios 

Everytime i look at funds and vanguard funds it just looks like i could make much better returns moving everything to vanguard and deversifying it with funds there..

I was given an investment in Investment Company of America. I watched it for a while. Eventually I sold it and moved the money to vanguard, where the rest of my investments were at that time. I'm a bit more diversified now.

Scripta gives the mantra of the securities industry "Past performance is not an indicator of future results." That statement is very stupid. Of course, if every fund remains invested in the exact same companies, in the same ratio, and the market keeps moving in all those companies in the same way, the funds that do better than average will continue to do better than average. Those that do worse will do worse. The problem is that the market is a fickle thing -- it's more psychology than logic.

Index funds have the advantage of low cost, and predictable investment strategies. That didn't help when the bottom fell out of the oil market, and that won't help when the bottom falls out of whatever is next. That's why funds and diversification and all that.

And if I knew what was next, I'd be ready for it. Instead, I work for the man, just like everybody else.

scripta said:   Past performance is not an indicator of future returns. You can't look at a fund that has done well (or poorly) and assume that it will continue to do well (or poorly).

The only thing you can do yourself is invest in funds (ETFs are better than mutual funds) that have the lowest possible costs -- no front or back load fees and extremely low annual maintenance fees. I aim for 0.1% (one tenth of one percent) on average.

https://www.bogleheads.org/wiki/Lazy_Portfolios

  ETFs are just a form of a mutual fund that's bought and sold like a stock, rather than for the NAV (Net Asset Value) at the end of the trading day.

https://www.bogleheads.org/wiki/ETFs_vs_mutual_funds

micha8s said:   Scripta gives the mantra of the securities industry "Past performance is not an indicator of future results." That statement is very stupid.Uhm, what??? Are you saying that it's wrong?

OP specifically said: "i would like to be able to get into finding funds that have better rates of return". That's the very stupid statement, not the mantra I used.



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