Also in this playlist...
This transcript is automatically generated
I think they -- in a lot of ways it's interesting because.
If you -- -- you wanna get past this issue whether its General Motors whether it's the banks of the stress tests and start to move.
Imagine a day -- we're not talking about them going potentially into bankruptcy be like thinking that we don't talk about Yahoo! Microsoft -- Tina what will we talk.
But could -- viewers -- that neighbors that's got.
Doubles and with the -- we said earlier gonna cut talk to Scott from -- -- senior investment strategist.
And it's got great to have you on on -- day in which are obviously talking about your industry talk about 41 case I don't know how much of the conversation that we've been having you've been able to hear about.
Yeah we started with a focus of kind of younger -- investors -- people their thirties 20s30s forties.
That are that have been having a rough time -- over the last ten years obviously have a lot more time to save them.
Don't get as much attention is people who are about to retire now what should those people be thinking about.
Probably -- there was a lot of great dialogue that I have been able to listen to and I appreciate being here today.
And it really -- been put in really three.
Components for investors say in their thirties even forties to be concentrating on right now I'm.
And one and we heard the theme I think throughout a couple the other guests.
Continuing to save.
Not making a decision to stop saving into the 401K plan.
And actually doing your best that you can afford -- to increase savings at this point in time.
Especially for younger investors are at a point where if they've been saving save for.
A few years ten years or so.
And the relative size of their portfolios not.
That large yet.
The contributions going into the -- their portfolios at this point are greater fraction of their portfolio.
And say somebody in their fifties and sixties -- of accumulated a much larger balance so.
Contributions going in at these points in the markets -- -- The equity markets are down I think are very very vital in the long term success success of the portfolios.
The second thing an addition to continuing to save an increase that on a regular basis would be.
Focusing on your asset allocation as an investor and making sure.
Realizing what's happened in 2008 as a as a precursor to what might happen again because this certainly could.
And historically speaking we've actually seen.
Downturns in the equity markets like weeks we've seen in 2008 and in early 2009.
So it shouldn't be a great surprised all.
But make sure your asset allocation is appropriately situated for your personal situation.
And that is not necessarily a one size fits all -- say for every one.
But for those who are engaged in the process.
And willing to think about.
They're risk tolerance their financial situation how much risk can they afford should their 401K -- -- bites -- -- 30%.
I think it's important to -- to take that the next step further and be broadly diversified we heard that concept as well brought out that's not just didn't want.
Let me to stop -- there really quick if they test your average vacation I was looking at what is here.
-- reports here about the benefits of rebalancing and and we have some great questions coming in that we when he gets the specific seven just a moment but if I could -- on that point about diversification.
It was interesting you re -- what you guys had to say about how.
You could start your find and and you're only like let's say your 401K.
And without you knowing it you've drifted further and further into equities and it didn't really realize that and I think that's something that happens -- and if we look at what institutional investors own -- you don't really realize that hey do you want a piece of Citigroup -- do a -- of -- and -- Coca-Cola or Pepsi or.
Hey you don't really know how your find is broken down so what is -- trend that over the last several years as people try to diversify and rebalance their fun.
Is it typical trend that a lot of our -- have already gone into the stock market and maybe of is is to overweighted in that direction.
Well from a diversification standpoint I mean that's.
One of the difficulties -- and I think plan sponsors it over the years have tried to do this from an education standpoint.
Is it educate participants on the types of funds that are in the end of the plans and why they're in there.
Been getting and understand the differences and however.
We have seen -- over over time there does occur.
A lot of overlap or from a performance chasing standpoint people tend to get to overweighted of one particular.
Sector asset class or type of funds so.
One remedy of that to realize that you're not being.
Two concentrated on a particular area is utilizing an indexing basis so that way.
You know from a transparent standpoint what is underlying the investments in the portfolios.
In addition you don't have potentially active managers -- -- buying.
Two or three or four actively managed portfolios they may tend to drift in style from time to time depending on the market conditions.
And therefore without you even knowing it becoming overweighted in a particular sector.
Not realizing the increase in the risk of the year adding to your portfolio.
Right it's interesting NL I I think your value disagree this concept I don't I thought out and it anyway to you because you haven't diversification as many people have -- -- number about a guested as well.
Diversification for a lot of people the last decade or so hasn't worked well right everything's been down to -- -- May be certainly in the last six months everything's been down.
But on -- system is there's been -- more people kind of cropping up to say.
You know what it is diversification isn't as sort of just spreading it out over a number of assets I don't know a lot about any of them I'm -- concentrate and some -- really now.
If I'm really researched gold for exam I'm I'm I'm I'm going to be -- gold.
Gold guy know -- to get -- -- to get out that's what I know or.
You know maybe it's it -- it -- -- May -- it's -- -- it's it's some sort of a sector of the stock market.
What's wrong with that cat that that strategy of really doing your own research knowing something and making a big bet on a large -- those -- the big winners for a lot of -- Sure sure.
And -- I'd start out by saying in the one problem with that is as we've all you -- seen historically speaking.
The markets are very volatile certain sectors do well -- different periods of time they don't do well and others and now we can go back a long way and see.
Numerous examples of say whether it's oil or gold or large cap stocks are small cap stocks for instance will outperform for awhile.
But typically will -- -- -- -- one point in time -- so if you know what you what you think you know when negated now that that -- basement the basis of the question that you really -- you've done your research you're gonna get out when it turns bad what's wrong with that.
Well if you're able to do that and be successful at that than that certainly could be a successful strategy but our research has shown part -- and I heard a couple the other guests -- mentioned in this well.
It's a very very difficult proposition has been many studies done including around to show on average now.
Timing the market.
And stock selection and so forth is actually detracted from.
Portfolio performance on average so at that I -- of the actors as well.
Even for the average professional investor including mutual fund -- it's a very difficult.
Propositions it to outperform the market.
It can be done.
And there are managed as they have done -- the problem is it's hard to do on a consistent basis.
And it's hard to identify this man is up so everybody an index funds forget about actively managed funds at all.
Well those who won one option is looking at that there's two benefits to that.
One is the cost low cost index funds and as as I mentioned for it thirty year olds and forty girls -- be thinking about now.
And additionally -- controlling their costs you can't control the market return but what you can controls how much you're paying for your exposure.
To the underlying investments -- you're getting so.
Indexing provides very very low cost exposure to the asset classes that you're looking to be diversified -- Actively managed funds on average will typically be higher in cost.
So you have a cost dragged here and that's really one of the primary reasons active managers -- at a difficult time outperforming the market not because they can't.
Or maybe do some market timing effectively it's just the cost -- that they're doing is not able is it to you to overcome the benefit that they're providing.
Over long periods of time really certainly on any given them.
Really -- your -- an athlete you we have seven that's your actual specific questions we can't get too but just at that general found.
How often is too often to -- your financial advisor -- borrow one K -- -- how often she checked -- actually talked to real person.
Sure I mean I think that comes down to personal.
Comfort level outline how much -- how did you get going to be bothered.
-- -- How much you understand your portfolio and actually I think it comes down to the job that your financial advisors -- if -- counseled you correctly.
And you see market moves on a daily basis is actually should be an expectation.
That's been building and and only contacting that financial advisor.
When you have a need such as a life changing event or some -- sort of a financial position changed that may warrant some sort of a change in year overall position.
And not because of daily market move out of place benefit -- -- that noise there -- -- he's got the speed dial him rest.
Thank you Scott we appreciate it got -- great that you vanguard -- -- guys back intense.
Thank you is a pleasure.
Scott Donaldson there with us -- right town -- for hope is tomorrow night and Dave Ramsey was out with a sub what was it last week talking about that -- David has been on yesterday.
Because this -- something we're real excited about it Fox Business because.
You know we're so negative.
And I -- and no we're we're.
You know they.
No it is it's is it through its ban on it's terrible it's everybody but Davis negative the only candidate so that he can cheers all up as we all think.
The world -- and Marlon Davis thinks -- didn't think I am I negative bags full -- just -- and I'm just kidding guys not negative sense cynical Chris thank you very much anyway.
Filter by section