If something cannot go on forever, well then, it will eventually stop. So said economist Herbert Stein when he made this obvious but insightful observation. Trees do not grow to the sky, and matters that are truly unsustainable eventually come to an end. The most recent example of something that can’t go on forever has been the inflows into low-cost, passive index funds, primarily to the detriment of higher-cost, actively managed funds. As the Wall Street Journal reported: “For the first six months of 2018 the amount of money going into all U.S. passive mutual funds and exchange-traded funds was down 44 percent from the same period a year earlier.” The decade after the financial crisis saw rivers of money gushing into the three biggest indexers — Vanguard Group, BlackRock Inc., and State Street Corp. These firms now manage almost $15 trillion in equities and fixed-income funds. All three are many times larger than they were in the mid-2000s. During the … [Read more...] about The index funds are going to be just fine
Exchange traded fund vs index fund
For a different take on environmental, social, and governance-based investing, or ESG, we spoke with Vanguard investor Dan Wiener, who publishes a monthly newsletter on all things Vanguard. Wiener takes a dim view of ESG. That’s largely due to under-performance over a long period of time, he said. “Over time, ESG and SRI [socially responsible investing] strategies have not proven to be performance winners,” Wiener contends. “They may allow their investors to sleep better at night from a social-conscience point of view, but they aren’t going to put more money in your pocket, they aren’t going to give you more money to direct towards the social, environmental, or governmental issues that matter most to you, and they haven’t had much of an impact, if any, on corporate-governance practices.” Plus, one investor’s definition of what makes an investment ESG-worthy might make another recoil, he adds. Let’s take … [Read more...] about Do ESG investments outperform? One investor says ‘no way’
U.S. stock indexes advanced moderately, as earnings for Caterpillar (CAT) checked in 32% higher than expected in the stock market today. The Nasdaq and S&P 500 were up 0.1% after fading from early gains of 0.6% and 0.5%, respectively. The Dow Jones industrial average tacked on 0.1% as it also pared gains. Copper miner Freeport-McMoRan (FCX) reported quarterly results and stepped up earnings 207% vs. the year-ago quarter but that fell short of expectations. Analysts expected a 273% gain. Lockheed Martin (LMT) grew earnings 31%, topping views for a 10% gain. Housing Reports Housing had a busy morning for data. Homebuilder stocks have been struggling. The iShares U.S. Home Construction (ITB) exchange-traded fund is trading 17% off its Jan. 24 high. The S&P Core Logic Case-Shiller home price index for February came in at 0.8%. Analysts expected a 0.7% gain. Data is reported on a two-month lag. Figures for April will not be available until June. The Federal Housing Finance … [Read more...] about Stock Indexes Rise On Cat’s Earnings Beat, But Freeport Misses Badly
By DayanaYochim/NerdWallet There’s a lot to like about employer-sponsored retirement plans like the 401(k): They’re convenient (funded via automatic payroll deduction), offer tax savings (contributions lower a participant’s taxable income, and investments grow tax-free) and many companies sweeten the deal by pitching in their own money to encourage employees to save. But even this most valuable of company perks can be ruined by high retirement plan fees and crummy investment choices. It’s these factors that have more and more employees crying foul and filing lawsuits — more than a dozen in the past year, Bloomberg Bureau of National Affairs reported — against their bosses for the equivalent of 401(k) malpractice. Potential awkwardness on annual Boss’s Day aside, the recent rash of worker uprisings over 401(k) fees is a good rallying cry for all investors to take a closer look at their workplace retirement plan. Size matters The … [Read more...] about How to tell if your 401(k) is a dud
(MoneyWatch) Exchange-traded funds have certainly been hot, and the five hottest since their inception tell us a lot about investor behavior. Let's take a look at the largest five, according to Index Universe. 1. SPDR S&P500 (SPY). The S&P 500 fund was the first index fund ever launched, so it might not come a as shocker that this State Street fund launched in 1993 is the industry leader, at $98.83 billion in assets and with an expense ratio of .09 percent. Since it misses out on mid- and small-cap stocks and must trade based on the actions of the Standard & Poor's committee, it is an illogical choice for investors but gives evidence to the power of inertia. 2. SPDR Gold (GLD). This State Street fund owns gold and comes in at $73.93 billion in assets with an expense ratio of 0.40 percent. The success of this fund is due to speculators coming in as a convenient way to own the hot metal. While I don't know what the price of gold will be in a couple of years, chasing … [Read more...] about What are the 5 largest Exchange-Traded Funds?