Ever since exchange-traded funds became popular, many index fund investors have taken notice. Should we try to take advantage of the often-lower expense ratios? Can we overcome the commissions from trading? For example, both of these track the S&P 500 index:

IVV – iShares ETF, expense ratio of 0.10%
VFINX – Vanguard Mutual Fund, expense ratio of 0.18%

I just ran across this article at IndexUniverse.com, which compares the performance of mutual funds vs. ETFs for various indexes.

The general conclusion was that the main ETF for an index outperforms the average mutual fund tracking the same index. However, if you choose the Vanguard fund version, you will get very similar or sometimes even better performance due to their superior index management. [Read more…]

Back in May, legislation was passed that allows Traditional IRAs to be converted to Roth IRAs without any income restrictions in 2010. Previously, this conversion was only available to taxpayers with adjusted gross incomes of $100,000 or less, no matter if you’re married or single. You even get two years to pay the taxes on the conversion. One of the more detailed articles I’ve seen written about this change is this USA Today article.

Another side effect of this new law is that it opens up a gaping loophole so that allows anyone to contribute to an Roth IRA, albeit indirectly:
[Read more…]

Here is another snapshot of my retirement portfolio as of market close 10/7. As indicated in my previous snapshot, I simultaneously sold ~$10,000 of iShares S&P 500 Index ETF (IVV) and contributed $10,000 to my Solo 401k, which I used to buy Fidelity Total Stock Market Index Fund (FSTMX).

[Read more…]

It’s very hard to estimate exactly how much we’ll have to save for retirement, as that would require knowing how much our investments will grow in the future. Even if we try to do long-term trends, this can be difficult. But Richard Ferri, author of All About Asset Allocation and founder of Portfolio Solutions, LLC has done his best by layering risk premiums to estimate market returns. You can find the article for free online – ‘Portfolio Solutions 30-year Market Forecast’. An excerpt:

At the end of each year, we analyzed several economic and market risk factors including Federal Reserve forecasts, inflation forecasts derived from inflation protected securities, and the volatility of asset classes, styles, and categories. From that data, we developed estimates for longterm future returns.

Here are some of the results:
[Read more…]

Spent some time this weekend reading many of the articles at FundAdvice.com. The website is the educational arm of Merriman Capital Management, an investment management firm that is heavily into DFA funds. They promote no-load, asset-specific, low-cost funds (which often end up as index funds), and have a lot of interesting things to say on both active and passive investing.

I naturally gravitated towards the passive investing articles, and favorite article so far is ‘The ultimate buy-and-hold strategy’, which agrees with why I want to slice-and-dice my portfolio. I was also intrigued by their ideas for investors with small portfolios. Instead of picking an all-in-one fund or a cash fund until you have enough to invest, they advise you to pick the asset class with the most potential return but highest volatility (U.S. small-cap value to begin with) and build upwards.
[Read more…]