Comments on: Benjamin Graham and the Wisdom of Index Funds http://www.fivecentnickel.com/2009/04/10/benjamin-graham-and-the-wisdom-of-index-funds/ personal finance tips, tricks, and commentary Sat, 21 Nov 2009 22:11:52 -0500 http://wordpress.org/?v=abc hourly 1 By: ObliviousInvestor http://www.fivecentnickel.com/2009/04/10/benjamin-graham-and-the-wisdom-of-index-funds/comment-page-1/#comment-130749 ObliviousInvestor Fri, 10 Apr 2009 22:23:51 +0000 http://www.fivecentnickel.com/?p=3278#comment-130749 Jacob: You bring up a great point. Portfolio turnover definitely plays a role in increasing expenses. That's yet another point in favor of index funds over actively managed ones. Jacob: You bring up a great point. Portfolio turnover definitely plays a role in increasing expenses. That’s yet another point in favor of index funds over actively managed ones.

]]> By: Jacob http://www.fivecentnickel.com/2009/04/10/benjamin-graham-and-the-wisdom-of-index-funds/comment-page-1/#comment-130745 Jacob Fri, 10 Apr 2009 20:31:20 +0000 http://www.fivecentnickel.com/?p=3278#comment-130745 While I wholeheartedly agree with your article, I am fuzzy on the math. I literally just did a presentation for class on this fact. The expense ratios are calculated based not just on your assets, but the gains you also receive. So if you have an asset increase of 10%, your total end assets would equal 110% of the original investment. Then an expense ratio of 1.5% is based off of the 110%. Example $10,000 (Investment at 10% Interest) $11,000 (Final Worth) -$165 (1.5% on 110%) _______ $10835 which means 1.65% removed from your actual investment. Which means an actual interest rate of 8.35%. I originally thought it was just a direct subtraction, but after deeper research, I turned up this fact. It is because the 10% interest is based off of original investment, and the expense is subtracted from investment plus interest or 110% of investment in this case. Oh, and another little fun fact. Hidden costs that are passed onto the investor in mutual funds (through Turnover, Market Impact [bid spreads], and loads) actually push the average expense on mutual funds up to about 3%. While I wholeheartedly agree with your article, I am fuzzy on the math. I literally just did a presentation for class on this fact. The expense ratios are calculated based not just on your assets, but the gains you also receive. So if you have an asset increase of 10%, your total end assets would equal 110% of the original investment. Then an expense ratio of 1.5% is based off of the 110%.

Example
$10,000 (Investment at 10% Interest)
$11,000 (Final Worth)
-$165 (1.5% on 110%)
_______
$10835 which means 1.65% removed from your actual investment. Which means an actual interest rate of 8.35%.

I originally thought it was just a direct subtraction, but after deeper research, I turned up this fact. It is because the 10% interest is based off of original investment, and the expense is subtracted from investment plus interest or 110% of investment in this case.

Oh, and another little fun fact. Hidden costs that are passed onto the investor in mutual funds (through Turnover, Market Impact [bid spreads], and loads) actually push the average expense on mutual funds up to about 3%.

]]> By: Jesse @ PFFirewall.com http://www.fivecentnickel.com/2009/04/10/benjamin-graham-and-the-wisdom-of-index-funds/comment-page-1/#comment-130744 Jesse @ PFFirewall.com Fri, 10 Apr 2009 20:30:07 +0000 http://www.fivecentnickel.com/?p=3278#comment-130744 He is such an amazing man. Great article. He is such an amazing man. Great article.

]]> By: OblivousInvestor http://www.fivecentnickel.com/2009/04/10/benjamin-graham-and-the-wisdom-of-index-funds/comment-page-1/#comment-130734 OblivousInvestor Fri, 10 Apr 2009 13:01:33 +0000 http://www.fivecentnickel.com/?p=3278#comment-130734 Baker: Thanks for the kind words. Good luck with your journey towards being debt free. DDFD: Precisely. Most of us just won't put in the time, nor can we afford the risk. RJ Weiss: Great video! Hadn't seen that before; thank you for sharing it. Baker: Thanks for the kind words. Good luck with your journey towards being debt free.

DDFD: Precisely. Most of us just won’t put in the time, nor can we afford the risk.

RJ Weiss: Great video! Hadn’t seen that before; thank you for sharing it.

]]> By: RJ Weiss http://www.fivecentnickel.com/2009/04/10/benjamin-graham-and-the-wisdom-of-index-funds/comment-page-1/#comment-130733 RJ Weiss Fri, 10 Apr 2009 12:54:41 +0000 http://www.fivecentnickel.com/?p=3278#comment-130733 Buffett who was taught by Graham talked about this same thing in a MBA talk he did at Florida. He basically said that 99% of investors should be in index funds. Picking stocks should be your full time if you're in it. Link - http://www.youtube.com/watch?v=P-PobeU4Ox0 Buffett who was taught by Graham talked about this same thing in a MBA talk he did at Florida.

He basically said that 99% of investors should be in index funds. Picking stocks should be your full time if you’re in it.

Link – http://www.youtube.com/watch?v=P-PobeU4Ox0

]]> By: DDFD at DivorcedDadFrugalDad http://www.fivecentnickel.com/2009/04/10/benjamin-graham-and-the-wisdom-of-index-funds/comment-page-1/#comment-130732 DDFD at DivorcedDadFrugalDad Fri, 10 Apr 2009 12:23:41 +0000 http://www.fivecentnickel.com/?p=3278#comment-130732 Good post. For most people this is the way to go . . . Picking individual stocks is difficult and dangerous . . . It requires doing your homework and analytical skills most people just don't possess-- even then, it requires assuming risks most people can't afford to take. Good post.

For most people this is the way to go . . .

Picking individual stocks is difficult and dangerous . . .

It requires doing your homework and analytical skills most people just don’t possess– even then, it requires assuming risks most people can’t afford to take.

]]> By: Baker @ ManVsDebt http://www.fivecentnickel.com/2009/04/10/benjamin-graham-and-the-wisdom-of-index-funds/comment-page-1/#comment-130731 Baker @ ManVsDebt Fri, 10 Apr 2009 11:28:58 +0000 http://www.fivecentnickel.com/?p=3278#comment-130731 Great article! Although I'm currently not in the market, I'm convinced that once I'm out of debt, Index funds will be the way to go. Great article! Although I’m currently not in the market, I’m convinced that once I’m out of debt, Index funds will be the way to go.

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