Young poker players and their winnings?

[MatthewRyan]

Short term bond funds would be expected to provide a higher return because they add more risk(liquidity risk, interest rate risk, default risk), as opposed to 'risk free' cash.

Also, notice I said bond funds, not bonds.

For example, currentle the Vangaurd Prime MMF yeilds 4.28%, and the Short Term Bond Fund Index yeilds 4.77%.

http://flagship5.vanguard.com/VGApp/hnw/FundsByType

-Matt

For a longer explanation goodle bond/risk or something.

[rockrock]

I would also read the morningstar.com vanguard diehards forum. Excellent and active forum for passive investing with the occasional well-informed active vs index debate.

[eastbay]

[ QUOTE ]

there isn't some way to make 10%+ passively and with a minimum of risk?

[/ QUOTE ]

What is a "minimum of risk"?

Why do you think banks make mortgage loans at 6% or 7%? Why do that when they could get 10% passively with a "minimum of risk"?

The market may not be perfectly efficient but it is also not braindead.

Think of it this way: if you have a good credit rating you can probably secure a no questions asked loan at 7% or 8%. If you could invest at minimal risk at 10%, why not just borrow the max, invest, pocket the difference, and repeat until filthy rich?

eastbay

[MatthewRyan]

[ QUOTE ]
[ QUOTE ]
Short term bond funds would be expected to provide a higher return because they add more risk(liquidity risk, interest rate risk, default risk), as opposed to 'risk free' cash.

Also, notice I said bond funds, not bonds.

For example, currentle the Vangaurd Prime MMF yeilds 4.28%, and the Short Term Bond Fund Index yeilds 4.77%.

http://flagship5.vanguard.com/VGApp/hnw/FundsByType

-Matt

For a longer explanation goodle bond/risk or something.

[/ QUOTE ]

all of these rates suck

ing pays me less than 4% and you just said some stuff that pays less than five

i'm 25, i don't have ANY money that i don't want to have access to in the next 5 years, who knows what may come up (especially with the forclosure boom thats just around the corner in the US [img]/images/graemlins/grin.gif[/img] )

there isn't some way to make 10%+ passively and with a minimum of risk?

[/ QUOTE ]

The short answer is no, not for 'low' risk.

[Newt_Buggs]

wow, there has been a lot of excellent advice here. A big thanks to everyone, it is much appreciated.

[ QUOTE ]

20% US Total Stock Market Index
20% US Large Cap Value Index*
10% US Small Cap Index*
10% US Small Cap Value Index*
10% REIT Index
10% European Index
10% Asia/Pacific Index
10% Emerging Markets Index*


[/ QUOTE ]
Something like this looks great. One question though, if my only concern is expected value and not risk couldn't I only invest in the ones that have a higher rate of return than the S&P?

[eastbay]

[ QUOTE ]
wow, there has been a lot of excellent advice here. A big thanks to everyone, it is much appreciated.

[ QUOTE ]

20% US Total Stock Market Index
20% US Large Cap Value Index*
10% US Small Cap Index*
10% US Small Cap Value Index*
10% REIT Index
10% European Index
10% Asia/Pacific Index
10% Emerging Markets Index*


[/ QUOTE ]
Something like this looks great. One question though, if my only concern is expected value and not risk couldn't I only invest in the ones that have a higher rate of return than the S&P?

[/ QUOTE ]

You mean "had" a higher rate of return? That is not the same as "have" or more importantly "will have." That's the rub.

eastbay

[Sniper]

[ QUOTE ]
[ QUOTE ]
wow, there has been a lot of excellent advice here. A big thanks to everyone, it is much appreciated.

[ QUOTE ]

20% US Total Stock Market Index
20% US Large Cap Value Index*
10% US Small Cap Index*
10% US Small Cap Value Index*
10% REIT Index
10% European Index
10% Asia/Pacific Index
10% Emerging Markets Index*


[/ QUOTE ]
Something like this looks great. One question though, if my only concern is expected value and not risk couldn't I only invest in the ones that have a higher rate of return than the S&P?

[/ QUOTE ]

You mean "had" a higher rate of return? That is not the same as "have" or more importantly "will have." That's the rub.

eastbay

[/ QUOTE ]

As Eastbay said, past performance does not necessarily mean the future will look the same... the reason for diversification is to reduce the variance.

That said, if you want to assume a higher risk level, you can do that by changing the % allocations (and the fund types)! Which is exactly the high-level thinking that primarily passive investors should be doing on a periodic basis.

[jively]

[ QUOTE ]
[ QUOTE ]

20% US Total Stock Market Index
[...]


[/ QUOTE ]
Something like this looks great. One question though, if my only concern is expected value and not risk couldn't I only invest in the ones that have a higher rate of return than the S&P?

[/ QUOTE ]
You could.

However, the biggest mistake that most investors make (over and over throughout their lifetimes) is selling out of things that have gone down recently, and buying into things that have done well lately - the hot funds, the 5-star ones that are on Money magazine.

I think if you only had small stocks and emerging markets stocks, you would have a higher expected return with a really high level of risk. So, the bad years would pretty bad. And most investors don't have the discipline to stick with the same allocation year after year.

If you want to be a little more aggressive than my previous recommendation, how about:

15% US Total Stock Market Index
15% US Large Cap Value Index
15% US Small Cap Index
15% US Small Cap Value Index
10% REIT Index
10% European Index
10% Asia/Pacific Index
10% Emerging Markets Index

-Tom

[lamchau]

[ QUOTE ]

15% US Total Stock Market Index
15% US Large Cap Value Index
15% US Small Cap Index
15% US Small Cap Value Index
10% REIT Index
10% European Index
10% Asia/Pacific Index
10% Emerging Markets Index

-Tom

[/ QUOTE ]

So let say I have 100k to invest every year. Do I keep putting 15k in US Total Stock Market Index, 15k in US Large Cap Value Index etc. every year for the next 20 years? The reason I am asking this because I do not get the idea of asset allocation.

P.S. Yes, my Larry index and Ferri books are coming.