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To: RWR8189
A few caveats about the advice offered in this article.

1. One risk one seldom mentioned is the risk of withdrawal. If the the stock market is in a bear phase and one is required to withdraw funds, one's capital is disproportionally diminished.

2. Many studies promoting index funds use historical indices to prove the wisdom of investing in such funds. What these studies rarely mention is that indices are constantly by dropping some stocks while adding new stocks.

3. One should pay close attention to the starting and ending dates of the studies mentioned in point 2 above.

4 posted on 05/17/2006 3:27:36 AM PDT by monocle
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To: monocle
1. One risk one seldom mentioned is the risk of withdrawal. If the the stock market is in a bear phase and one is required to withdraw funds, one's capital is disproportionally diminished.

How is this different from having to liquidate loser stocks that your idiot pump-and-dump churn-o-matic broker got you into?

2. Many studies promoting index funds use historical indices to prove the wisdom of investing in such funds. What these studies rarely mention is that indices are constantly by dropping some stocks while adding new stocks.

Yes, and a properly managed index fund will do likewise. So? The return is the same, minus the relatively trivial expenses associated with getting rid of the old stocks and investing in the new. And it's not "constantly" dropping stocks, it's occasionally dropping stocks.

Still way cheaper than your typical churn-o-matic full service stockbroker, like the one who turned my grandfather's millions into chump change for his heirs and hundreds of thousands of dollars of commissions for himself.

3. One should pay close attention to the starting and ending dates of the studies mentioned in point 2 above.

I don't care about short term gains or losses. Dollar-cost average, buy and hold, and don't pay for crooked stockbrokers' yachts, that's my motto. I'll be buying low-fee index funds from the Vanguard and Fidelity web sites regularly for the next 30 years, and I will never sell any of it until I retire. A very few shrewd or lucky traders of individual stocks will do better than I. Most will do worse. Many will do far worse.

-ccm

33 posted on 05/17/2006 11:05:46 AM PDT by ccmay (Too much Law; not enough Order)
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