Comments on: Buy What The Experts Are Buying

By: Inflation

Inflation — Sun, 15 Nov 2009 03:04:02 +0000

Do what China is doing and buy commodities. Invest in hard assets (silver, gold, platinum, EVEN oil…). You can do this by owning the physical metal or owning a related stock. The Fed is hellbent on papering over losses. Take advantage of it.

By: investment stocks

investment stocks — Mon, 05 Oct 2009 00:01:10 +0000

investment stocks…

I agree with what you wrote here at Stocks Watchlist Wordpress Plugin | Trader Knowledge. Good points there….

By: Ridiculous

Ridiculous — Sun, 12 Jul 2009 20:44:51 +0000

You’re right, actively managed funds do have high fees. But…with index funds you could get fees down to something like 0.25% a year. Index funds beat 80% of actively managed funds, and you’re absolutely out of your mind if you think the average teenager is going to do better picking stocks than a professional, active fund manager. The fact of the matter is, index funds are far superior to individual stock selection–just because teenagers are attracted to penny stocks is no excuse to give them this advise. Warren Buffet himself has recommended index funds to the average investor, and I certainly would not call him a lemming.

And transaction fees are accrued every single time you make a transaction. If you are copying an active fund, you will definitely suffer transaction fees on a regular basis, which is simply unaffordable for an investor with $2000.

By: RPG CFA

RPG CFA — Thu, 02 Jul 2009 08:59:09 +0000

It’s the COMMENT that is flawed. The article is GREAT.
1) If a young investor wants to buy stocks they usually turn to penny stocks or some fly-by-night stock they hear about on Mad Money. But if they read this article they would know they can learn from THE BEST INVESTOR EVER Warren Buffet FOR FREE. If they don’t like him they can buy some of the stocks owned by the 25 BEST mutual funds named by Kiplinger. That’s much safer than the alternative.
2) Yes, there may be $100 in transaction fees but that is a 1 time fee whereas a mutual fund may charge a 2% expense charge EVERY SINGLE YEAR.
3) If you buy a passively managed index fund who’s the lemming now? You’re only following the entire market and your investment will live and die by what it does. That’s the real definition of a lemming.

By: Flawed Strategy

Flawed Strategy — Sat, 27 Jun 2009 18:25:59 +0000

Copying the positions of major mutual funds is a fundamentally flawed strategy.

1) The author correctly points out that the list of stocks many funds own are publicly listed. But this is precisely the reason copying their positions will not work: everyone else is able to see the exact same information and many others are attempting the same strategy. Once a fund reports that it holds a certain stock, it has already made the purchase. Presumably, when the knowledge becomes public that a major mutual fund owns a certain company, the stock of that company appreciates because individuals follow the methodology described in the article. But because of this appreciation, the chance that an individual investor will be likely to buy the stock at a desirable price is slim.

2) However, if problem 1 was the only drawback, investors could still perhaps achieve respectable returns simply by copying the holdings of major mutual funds. Yet, for any investor that is unable to afford the typical $2000 minimum investment, the brokerage fees associated with emulating the portfolio of a major mutual fund will eradicate their hopes of achieving even average returns. Even if the person only chose ten stocks to buy, and went to an online discount broker, they would accumulate about $100 in fees. $100 for someone who cannot meet a $2000 minimum is no small amount. Additionally, given that many mutual funds, including Fidelity’s Magellan Fund, hold upwards of 25 stocks, the individual, novice investor has no hope of tracking the fund by purchasing individual stocks, at least not in an affordable way.

3) The author is correct that actively managed funds do have fees associated with them that eat into an investor’s return and, therefore, many investors would do well by avoiding such funds.

However, the answer is not to attempt to become a lemming and buy the individual stocks of the fund on your own. The average investor would be much better off investing in a passively managed, low expense-ratio index fund. He or she would achieve a superior level of diversification compared to both actively managed funds and individual stock selection and would also avoid many of the fees associated with active funds.

To suggest that investors with little capital, particularly investors with as little capital as college students have, would do well by purchasing individual stocks that they see some major fund owns is simply incorrect and disingenuous.