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Mutual funds amidst these volatile times

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Oct 30, 2008 2:47 am

A short Vikings retort would have done the job.

Oct 30, 2008 2:20 pm

No American Funds or S&P 500 index, Ice? You must be in to some really scary stuff.

Oct 30, 2008 2:29 pm

I have a funny CAIBX story.

  Exactly one year ago, I bought a new-to-me truck and wondered whether I should put some additional money down to lower the payments or invest it and systematically liquidate it to pay the note.   I called a 20+ year advisor at the Client Solutions desk for some advice, and with a heavy dose of condescension, he replied, "Duh, that's a no-brainer. Have you ever heard of Capital Income Builder? It's had one down year in 20 years. Don't send the money to the bank, put it in the fund and liquidate it every month to make the payment."   Of course, you guys know the rest of the story.
Oct 30, 2008 2:57 pm


Oct 30, 2008 3:32 pm
You probably could have replaced CAIBX with 7,000 other funds and ended up in the same place.  There was nothing wrong with the advice (though I am surprised that you had to actually call someone to ask for advice on that - that's pretty scary), we just hit the 100 year storm ( sort of like the one that hit 8 years ago  )   Personally, I would never "invest" moeny earmarked to pay off a short term loan.  I would have put it into CAIBX and paid the loan out of earned income cashflow (if the loan was at below-market rates).   So why exactly did you have to call to ask someone that?  No offense, that just sounds absurd to me.  Thats akin to a dentist calling the ADA to ask a question about brushing teeth.
Oct 30, 2008 4:25 pm

I thought it was a crazy idea, but I decided to solicit the adivce of a veteran and see what he had to say. He was so sure of his recommendation, I trusted him–and got blown up as a result. I’d been in the busines a year and a half and he had two decades under his belt.  

  Oh well, I can assure you I've learned a few lessons from the ordeal, and when a client called me a couple months ago to ask if they should put their money into a mutual fund and liquidate it to make their new car payments, I replied with a resounding, "HELL NO!!"    
Oct 30, 2008 5:17 pm

[quote=iceco1d][quote=GoingIndy???]I always love to hear the vanguard standard investing 101 line about the indexes beating 80% of all funds. Half truth statement, of course they beat money mkt funds, bond funds, balanced, g&i, and growth taking less risk than the market.  If you pull active funds doing around the 1.0 beta the argument loses steam very quickly.  There’s a ton of funds, even today that have done better than the mkt with much less risk.  

  The 80% basic concept is about as true as the other infamous investing 101 line that "housing only goes up".    Either way, if you use an allocation approach paired to risk tolerance not too many clients are taking the risk of the overall mkt, so we should be happy we're not down 36% ytd.  [/quote]   You clearly have no idea what you are talking about - like most chest thumping active managers and tactical advisors.[/quote]     Not to rehash with the board going into CAIBX, but if you have a thompson program on your computer, run the numbers.  Even Jeremy Siegal from Wisdom Tree when promoting his dynamic ETF's points out the Obama like, spin statement on the 80% line that the "index beats 80% of all funds".  The key word being ALL.      P.S. I couldn't help myself with the political connection with only a few days to go.
Oct 30, 2008 5:35 pm

i don’t get it borker.  if a client was sitting across the table from you and asked the very same question OF YOU, what would you have said?

Oct 30, 2008 6:48 pm

Of course I would have told them not to roll the dice on mutual funds and short-term money.

  I was willing to take more risk with my own money and sought the advice of a seasoned vet. He was adamant about using CAIBX, so I gambled and lost. I'm not mad at him, I just think it's a funny story.   One down year in twenty years and I invest the very same month it begins its decline toward its second down year in twenty years.