Market Timing

[TxSteve]

thanks all:

"Invest on your own........chances are you are probably smarter. " - I'm not.

"Yes. You don't know much about investing, right... yet you think you know more than the market?" really was just wondering if I have an unnatural 'cynisism' or if this was a commong feeling...an ignorance based fear that 'i'm doing it at the wrong time'

'Also you aren't likely to know if the Oppenheim guys are buying load funds (mutual funds that charge you an up front fee of up to 6% and pays most of that back to Oppenheim as a commission) unless you ask and research their recommendations. If they do that, starting 6% behind on top of fees will really hurt your results.'

thanks for a very detailed response, DC. I did ask, none of the mutual funds (as they call them) have any up front load fees.

its been about 2 months since my meeting with these guys (i didn't have any cash free at the time). they went through a list of 8-10 mutual funds that they felt best suited my needs (long term gains). i'm sorry to say i don't remember the specifics but have a msg in to them asking them to refresh my memory.

these funds covered many areas, both domestic and international.


thanks for the help and thanks for the advice. my current thought is to give these guys 100k now and possibly invest 100k-ish into the vanguard fund DC mentioned.

when i get my email back from them detailing the mutual funds they recommend i will post them here just in case anyone is curious...

[mtgordon]

FWIW I would suggest just doing the Vanguard thing for the reasons that DC posted.

[TxSteve]

thank you,

I'm looking into opening a Vanguard account as we speak.

is it just stupid if i'm considering opening a vanguard account (possibly in the 'lifetime' thing DC mentioned) and also investing a smaller amount with the planners?

[Sniper]

[ QUOTE ]
is it just stupid if i'm considering opening a vanguard account (possibly in the 'lifetime' thing DC mentioned) and also investing a smaller amount with the planners?

[/ QUOTE ]

The question you have to ask yourself is: Is it worth 0.25%/Qtr of Assets vs Your time to educate yourself about diversification (You can start with DC's recommendations, Jively's thoughts in the 401K thread, and Barron's recent posts).

[yellowbastard]

[ QUOTE ]
Anything with low Price/Book will have higher returns (see Fama-French literature).

MSCI indeces have solid value loading... the only retail indeces with lower price/book are S&P Pure Value indeces. The ETFs RPV, RFV, RZV cover the S&P Pure Value indeces. PZI is lower Price/Book than MSCI Small Value, but it's quasi-active management and .72 ER.

[/ QUOTE ]

Those are some very interesting ETF's. From what little I was able to gather, they have higher ER's and higher turnover but have offered higher returns if the methodology is back-tracked 10 years. In a taxable account, capital gains are also tax differed for ETF's so the turnover doesn't really seem like that much of a problem.

I am more interested in small-cap indexes because the companies are less well-known and therefore more likely to be "on sale". Am I correct in this assumption?

Also, I would like to evaluate each ETF's fundamentals if possible (P/E, P/B, ROE, ect...) but this is the best I could come up with from Standard and Poor's site. I also couldn't find anything on MSCI's site so I emailed them.

[mtgordon]

TxSteve,

I would say that the worst thing to do is to not have your money working for you. Therefore it isn't 'stupid' to invest some money with planners although a lot of people on this forum would say it's not optimal. I know I wasted more time than I should have trying to figure out what to invest in when I probably should have shoved it in a retirement fund like DC was talking about while I figured it out. (Just be aware that some funds have penalties for withdrawing the money before a certain time period which I think is often 2 months?) If giving some of the money to planners for now helps you feel more comfortable and gets your money working for you sooner then great.

One thing I would warn against would be feeling obligated to use the planners. If you put some money with them now and decide in the next year that you know enough to do it yourself, I hope you feel comfortable enough to do so.

Lastly, I would recommend fundadvice.com as a good place to learn about diversification, etc.

Cliff Notes:
Getting money in the market > money just sitting there
Doing it yourself > using a planner long term

[DcifrThs]

[ QUOTE ]

Anything with low Price/Book will have higher returns (see Fama-French literature).



[/ QUOTE ]

nittiness talking here but you do mean "had" rather than "will have" right?

the logic for that relates to the fact that investors haven't been demanding large multiples over the value of the assets and typically, those companies could have an easier time generating returns as their earnings grow?

the counter though is that companies about to go bankrupt have the lowest price to book ratio since their future is in doubt and the dissolution of their assets is near inevitable.

i haven't read the literature obviously but what types of companies (in what industries) have low price to books. aren't those basically banks? high price/book would imply the mkt expects large earnings growth off of a small asset base, like google or biotech companies i presume.

let me know if my thinking is on the mark here as equities (in the micro sense) aren't my strong suit

thanks,
Barron

[Jeff W]

[ QUOTE ]
is it just stupid if i'm considering opening a vanguard account (possibly in the 'lifetime' thing DC mentioned) and also investing a smaller amount with the planners?

[/ QUOTE ]

Yes. Stay far away from those Oppenheimer wolves.

[ChromePony]

[ QUOTE ]
thank you,

I'm looking into opening a Vanguard account as we speak.

is it just stupid if i'm considering opening a vanguard account (possibly in the 'lifetime' thing DC mentioned) and also investing a smaller amount with the planners?

[/ QUOTE ]

This isnt a horrible options, but honestly the Opp folks are probably just going to find you a diversication very similar to what Vanguard offers for at least 2% a year more. If you want to stick some money with them to feel it out though and see what they pick and revaluate in a year or two its probably at worst a rather small mistake.

[Jeff W]

[ QUOTE ]
[ QUOTE ]

Anything with low Price/Book will have higher returns (see Fama-French literature).



[/ QUOTE ]

nittiness talking here but you do mean "had" rather than "will have" right?

[/ QUOTE ]

We can never truly know the future. That said, the Price/Book premium(hencetoforth the Value Premium) has persisted out of sample in almost every developed and emerging market(couple exceptions like Italy but that could easily be noise) from 1929-present.

[ QUOTE ]
the counter though is that companies about to go bankrupt have the lowest price to book ratio since their future is in doubt and the dissolution of their assets is near inevitable.

[/ QUOTE ]

The explanation for the value premium seems to be some combination of behavior and human capital risk. The former is a free lunch and the latter is not. No one knows the whole story, yet.

[ QUOTE ]
i haven't read the literature obviously but what types of companies (in what industries) have low price to books. aren't those basically banks? high price/book would imply the mkt expects large earnings growth off of a small asset base, like google or biotech companies i presume.

[/ QUOTE ]

Banks typically have low price/book, as do utility companies and other sectors where slow growth is expected. Other companies with low Price/Book are typically distressed.