Comment by yannickt | Hacker News Reader

Comment by yannickt | Hacker News Reader

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I never said that it is dangerous to teach people about investing. I am saying that investing is about a lot more than stock picking. Since passive investors beat active investors after costs [1], I think it is better for the average investor to focus on things that they can control to a large extent, like savings rate, fees, tax efficient asset allocation, diversification, investment horizon, etc.

Also, I do not advocate buying just any index fund, just those that are a good proxy for the market as a whole. The S&P 500 is much more representative of the US stock market than the Dow 30, and the Wilshire 5000 even more so. It is may be easy to replicate the Dow 30, it is much harder to replicate the S&P 500. And this assumes that one is only invested in US stocks, and is not diversified across other asset classes, such as international equities or emerging markets.

There are plenty of index funds that charge much less 1% in fees. Many charge 0.25% or lower. The following page has a spreadsheet that calculates the impact of fees on mutual fund investors:

http://wheredoesallmymoneygo.com/detailed-breakdown-of-the-r...

(Canadian, but the idea is the same for any stock market)

Using the spreadsheet, let's assume an initial contribution of 100K, an annual contribution of 5K, a 5% growth rate, no trailer commission and no advisor payout.

After 25 years, an investor who put the money in a fund charging an MER of 2% would have lost 33.72% to compounding costs versus a 0% fee portfolio.

An investor who put the money in a fund charging an MER of 0.25% would have lost 5.07% to compounding costs versus a 0% portfolio. I don't think that's a bad deal for the average investor at all.

[1] Cf.: The Quest for Alpha, by Larry Swedroe; The Power of Passive Investing, by Richard Ferri

Actually, you did. The RFS was to teach people about investing, not stock picking. You've got an axe to grind and you're lying about what other people have said in order to grind your axe. The idea that passive investors beat active investors is nonsense. You cannot prove it, nor does your reference even address the issue. It is a claim wholly unsupported, and if you will think about it objectively, you'll find you cannot prove it without getting all investor to give up their entire trading history, and then evaluating them over the course of that history. Nobody has access to that information so they publish spurious nonsense in order to talk people into investing in their funds.

Your statements about the fees charged by mutual funds is inaccurate. %2 is appropriate, and in some cases it is %2.50 or %2.75. Which, according to your own link, means that over some period of time %90 of the money goes into fees.

You have heard a little bit about investing and think you know what you're talking about, but you're repeating the propaganda of people who were trying to sell you something.

I suggest that if you will go out and educate yourself, you will find that these people were trying to rip you off. In fact, your statements in this thread are proof positive that the RFS was right-- so many people are completely ignorant of investing-- even what investing "is". (you keep calling it "stock picking" as if that phrase was relevant.)

But I know you won't, I know you're emotionally invested in this ideology, because it likely dovetails with your political ideology (liberal, right? think people should be forced to invest in social security, which will never return even %1 of the money they give up, because its "dangerous" to let them invest that money themselves, right? If you're not a liberal, at least this shows the motivation for people spreading the idea that stocks are complicated and that teaching people about investment is dangerous.)

But, at the end of the day, having so many people completely giving up on investing simply means there's less competition for the outstanding deals out there, and the market is even more inefficient, which leaves me with more opportunities to profit.

So, for that, I thank you.

I've learned that, you cannot talk to people about investing-- for many of them it is like a religion. So you are free to have the last word. If people are foolish enough to believe you, then its their responsibility, not mine. I've proven you wrong, that you won't accept it is on you, not me. So, go to town.

I did not lie, you seem to be the one with an axe to grind and you haven't proven anything.

What I wrote about fees charged by index funds is perfectly accurate. For instance:

- the Vanguard Total stock Market Index Fund charges 0.07%;

- the Vanguard Total World Stock Index Fund charges 0.45%;

- the Schwab S&P 500 Index Fund charges 0.09%;

- the Fidelity Spartan 500 Index Fund charges 0.10%.

Of course most mutual funds charge much more, precisely because they are actively managed. Index funds are passively managed, involve very little trading, and as a result charge much less.

I never, ever advocated that people give up on investing, and I think you're the one in need of an education.

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