I find it very interesting to compare advise from financial advisers.
Dave Ramsey
If you have $300,000+ of debt listen to me to get motivated and make the required sacrifices to get out of debt by selling the second car and getting a second job. "Out of debt" includes your mortgage. Then buy a mutual fund but keep it simple or you won't do anything.
Ric Edelman
Once you are out of debt get diversified with all available asset classes, stocks, bonds, ETFs, Index Funds, International funds, real estate, natural resources and cash; but stay away from evil 3% annual fee Mutual Funds.
Suzy Orman
Get out of debt and diversify for women. And once you are as rich as me, buy Munibonds.
Robert Kiyosaki
Nothing works but real estate investing and silver. The US dollar will never be worth anything again because US is going broke due to Social Security and Medicare.
Jeremy Siegel
Macroeconomics tells us to keep investing for the long-haul and I've created my own ETFs called Wisdomtree to help you get there. (Economist for Wharton.) Economists always will give you a reason as to why their earlier predictions were so wrong.
Larry Kudlow
Always optimistic about America no matter what!
Cramerica
Buy! Sell! Buy! Sell!
At the end of all of this, I find I like listening to all of them because they do help somebody. When I try to help people most tend to be strapped with debt, then they slowly move to buying a house and getting a few mutual funds with their retirement account. Emotions and bad ideas from the media will drive them in and out of bad investments with even worst timing.
Most people will hopefully be realistic about their financial life, get out of debt, eventually pay off their house and stick with Warren Buffett's "Buy one or two low cost Index funds" idea and they will probably be fine. Unfortunately most won't make it this far.
Amazingly most of this list of financial experts admit to having made extremely large financial mistakes. Experience is what they have to share. Perhaps the best thing to happen to you will be an extremely bad choice early in life.
Craig.
Wednesday, June 25, 2008
Saturday, May 17, 2008
Inve$tment Club - Final
1. Closing Costs
Here is an article that talks about all the closing costs.
http://www.fool.com/homecenter/deal/deal04.htm
As we learned first hand from one of our members it can cost as much as $12,000 of closing costs for a $280,000 home. Make sure to take the time to know the fees and know that everything can be negotiated.
2. FICO
FICO -Fair Isaac Corporation was developed in 1956 by two guys named Fair and Isaac. This is the mostly widely used credit scoring system but not the only one. Some creditors will use their own system.
Improving your FICO credit score will entitle you to a better interest rate on a home.
Just because you are entitled to the rate, doesn't mean they will give it to you, so show around when it comes to financing a home.
http://www.myfico.com/CreditEducation/ImproveYourScore.aspx
Congress passed a law to allow everyone to view their credit "report" for free once every year. If you want your FICO credit "score" at the same time it is usually around $10.
Here is the site for your FREE report.
https://www.annualcreditreport.com/cra/index.jsp
The Three credit reporting agencies are Experian, TransUnion and Equifax.
3. Warren Buffett
I finished reading a compilation of some of Warren Buffett's annual reports and here are some quotes I feel pertain to our investment strategies.
"Another situation requiring wide diversification occurs when an investor who does not understand the economics of specific businesses nevertheless believes it in his interest to be a long-term owner of American industry. That investor should both own a large number of equities and space out his purchases. By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals. Paradoxically, when "dumb" money acknowledges its limitations, it ceases to be dumb."
"If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes."
"The most common cause of low prices is pessimism--sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer." (Translation: When everybody thinks stocks are a bad idea, is when you can buy them cheap. Buy low, sell high.)
4. Scams and Schemes
A wise man once told me that half of investing is knowing what NOT to invest in.
If somebody "guarantees" you 20% a month or a year.
It's not a good investment, it's a scam.
One of the most convincing, and still used, large scale schemes is called a Ponzi scheme which is also very similar to a Pyramid scheme.
http://en.wikipedia.org/wiki/Ponzi_scheme
State of Utah, top 10 investment scams for 2008.
http://www.securities.state.ut.us/press/topscams2008.pdf
Here is an article that talks about all the closing costs.
http://www.fool.com/homecenter/deal/deal04.htm
As we learned first hand from one of our members it can cost as much as $12,000 of closing costs for a $280,000 home. Make sure to take the time to know the fees and know that everything can be negotiated.
2. FICO
FICO -Fair Isaac Corporation was developed in 1956 by two guys named Fair and Isaac. This is the mostly widely used credit scoring system but not the only one. Some creditors will use their own system.
Improving your FICO credit score will entitle you to a better interest rate on a home.
Just because you are entitled to the rate, doesn't mean they will give it to you, so show around when it comes to financing a home.
http://www.myfico.com/CreditEducation/ImproveYourScore.aspx
Congress passed a law to allow everyone to view their credit "report" for free once every year. If you want your FICO credit "score" at the same time it is usually around $10.
Here is the site for your FREE report.
https://www.annualcreditreport.com/cra/index.jsp
The Three credit reporting agencies are Experian, TransUnion and Equifax.
3. Warren Buffett
I finished reading a compilation of some of Warren Buffett's annual reports and here are some quotes I feel pertain to our investment strategies.
"Another situation requiring wide diversification occurs when an investor who does not understand the economics of specific businesses nevertheless believes it in his interest to be a long-term owner of American industry. That investor should both own a large number of equities and space out his purchases. By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals. Paradoxically, when "dumb" money acknowledges its limitations, it ceases to be dumb."
"If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes."
"The most common cause of low prices is pessimism--sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer." (Translation: When everybody thinks stocks are a bad idea, is when you can buy them cheap. Buy low, sell high.)
4. Scams and Schemes
A wise man once told me that half of investing is knowing what NOT to invest in.
If somebody "guarantees" you 20% a month or a year.
It's not a good investment, it's a scam.
One of the most convincing, and still used, large scale schemes is called a Ponzi scheme which is also very similar to a Pyramid scheme.
http://en.wikipedia.org/wiki/Ponzi_scheme
State of Utah, top 10 investment scams for 2008.
http://www.securities.state.ut.us/press/topscams2008.pdf
Monday, March 24, 2008
Buying a House?
Just bought a place!
A big Thank You to Ross for going over how he just purchased a foreclosure.
Opinions.
Everyone will have an opinion.
You need to figure out what is right for you.
Personally I think it is a time to wait.
Ross has proven it's a time to buy.
Everyone is at a different point in their life.
To play it safe you should:
Here is a Spreadsheet to help you figure out what you can afford.
A big Thank You to Ross for going over how he just purchased a foreclosure.
- He figured out what he could afford and asked for referrals from people who had great experiences with a Realtor and great experience with obtaining a mortgage.
- He visited over 40 foreclosures before deciding.
- He purchased his home for six figures lower than comparable houses.
Opinions.
Everyone will have an opinion.
- It's time to buy.
- It's time to sell.
- It's time to wait.
You need to figure out what is right for you.
Personally I think it is a time to wait.
Ross has proven it's a time to buy.
Everyone is at a different point in their life.
To play it safe you should:
- Buy when you intend to stay in the home for at least 5 years.
- Have a good credit score of above 700.
- Have at least a 10% down payment.
- Six months worth of your costs in cash.
- Make sure you aren't stretching yourself too much.
Here is a Spreadsheet to help you figure out what you can afford.
Monday, February 25, 2008
TSP
This month Ross was kind enough to put together information on government TSP (Thrift Savings Plan) accounts.
He recommends diversifying your investments by putting your money into 3 Funds.
C Fund - Stocks of large and medium-sized U.S. companies.
S Fund - Stocks of small to medium-sized U.S. companies. (not included in the C Fund)
I Fund - International stocks of 21 developed countries.
Here is the comparison of the different plans:
http://www.tsp.gov/forms/comparison.pdf
Their costs (total expense ratio) is extremely cheap at below .05%
Historic Returns:
http://www.tsp.gov/rates/monthly-history.html
Feb 22-March 2 is National Save Week. (No I did not make that up.)
http://www.americasaves.org/national/saves_week.asp
Calculator to give you a ball park of how much you have to save now to have a comfortable retirement.
http://www.choosetosave.org/ballpark/
Article giving some reasons why you should not take a loan with your 401k:
The 5 biggest 401k mistakes
Three reasons not to take a loan from your 401k: (Ric Edelman version)
1) The money you borrow isn't not borrowed.
It is removed from the plan so it can no longer grow inside the tax shelter.
2) You have to repay the loan, that means you have to pay taxes twice on the same money.
3) You think you have 5 years to repay the load, but if you lose your job you have to replay the loan within 90 days.
Otherwise you get hit with taxes and a 10% penalty.
If you can absolutely avoid it, do NOT borrow from your 401k.
He recommends diversifying your investments by putting your money into 3 Funds.
C Fund - Stocks of large and medium-sized U.S. companies.
S Fund - Stocks of small to medium-sized U.S. companies. (not included in the C Fund)
I Fund - International stocks of 21 developed countries.
Here is the comparison of the different plans:
http://www.tsp.gov/forms/comparison.pdf
Their costs (total expense ratio) is extremely cheap at below .05%
Historic Returns:
http://www.tsp.gov/rates/monthly-history.html
Feb 22-March 2 is National Save Week. (No I did not make that up.)
http://www.americasaves.org/national/saves_week.asp
Calculator to give you a ball park of how much you have to save now to have a comfortable retirement.
http://www.choosetosave.org/ballpark/
Article giving some reasons why you should not take a loan with your 401k:
The 5 biggest 401k mistakes
Three reasons not to take a loan from your 401k: (Ric Edelman version)
1) The money you borrow isn't not borrowed.
It is removed from the plan so it can no longer grow inside the tax shelter.
2) You have to repay the loan, that means you have to pay taxes twice on the same money.
3) You think you have 5 years to repay the load, but if you lose your job you have to replay the loan within 90 days.
Otherwise you get hit with taxes and a 10% penalty.
If you can absolutely avoid it, do NOT borrow from your 401k.
Thursday, January 31, 2008
Want a $100,000?
PROBLEM
It is extremely important for your financial future to understand fees.
If you are giving to your 401k, they are probably putting you in Mutual Funds.
Congress is trying to force 401k providers to disclose all of their fees because Wall Street is completely taking advantage of us.
Historically the Stock Market has averaged around 10% return over a long period of time.
The more fees you pay to buy the stock market the less money you will have when you retire.
In some situations all of your fees put together actually become higher than 10%.
Which means you aren't making any money.
FEES
Here is an example of American Mutual Fund (AMRMX) fees:
1) Total Expense Ratio - .55%
2) 12b-1 fee (Advertising) - .22%
3) Front Load (Sales charge) - 5.75%
4) Managers fee - .26%
5) End of year distribution - 1.29%
6) SAI fee (Statement of Additional Information) averages - 1.25%
Total if bought in 2007: 9.32%!!!
Total each year after: 2.28% minimum.
Note that using a financial planner could cost you a flat fee or 1% of your entire investment.
When you are ready to retire, the difference will be hundreds of thousands of dollars!
There are currently bills on Capitol Hill that are trying to force Mutual Funds to show all of their fees:
http://www.hreonline.com/HRE/story.jsp?storyId=45931600
"[Education and Labor Committee Chairman Rep. George]Miller's bill, the "401(k) Fair Disclosure for Retirement Security Act", also would force companies to offer plan participants at least one low-priced index fund.
Sen. Herb Kohl, D-Wis., chairman of the Special Senate Committee on Aging, is expected to introduce a version of the Miller bill..."
While the House is expected to pass 401(k) fee disclosure legislation, the bill is not expected to make it through the Senate.
And the response of one of the Lobbiest:"...the proposed rules "would dramatically increase the administrative costs paid by plan participants while overwhelming them with information that is of little practical value as they make the decision to participate in the 401(k) plan and the decision of which investment option to select."
TRANSLATION
If we tell people how much it costs we will have to charge them more.
And they won't understand it anyway.
Image if you went into a store and bought some milk. At the cash register they say they can't tell you how much it costs because then they will have to charge you more and you won't understand it anyway. (No it doesn't make sense.)
Why does making something complicated make money for businesses?http://finance.yahoo.com/expert/article/moneyhappy/64338;_ylt=A9j8aqaG0KFHGLcA1J27YWsA
RESOLUTION
"By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals." ~Warren Buffett
We may never know all the fees associated with Mutual Funds because they don't have to tell us.
Mutual Funds hide their fees and the fact that most of them can't beat an Index Fund.
It is extremely important for your financial future to understand fees.
If you are giving to your 401k, they are probably putting you in Mutual Funds.
Congress is trying to force 401k providers to disclose all of their fees because Wall Street is completely taking advantage of us.
Historically the Stock Market has averaged around 10% return over a long period of time.
The more fees you pay to buy the stock market the less money you will have when you retire.
In some situations all of your fees put together actually become higher than 10%.
Which means you aren't making any money.
FEES
Here is an example of American Mutual Fund (AMRMX) fees:
1) Total Expense Ratio - .55%
2) 12b-1 fee (Advertising) - .22%
3) Front Load (Sales charge) - 5.75%
4) Managers fee - .26%
5) End of year distribution - 1.29%
6) SAI fee (Statement of Additional Information) averages - 1.25%
Total if bought in 2007: 9.32%!!!
Total each year after: 2.28% minimum.
Note that using a financial planner could cost you a flat fee or 1% of your entire investment.
When you are ready to retire, the difference will be hundreds of thousands of dollars!
There are currently bills on Capitol Hill that are trying to force Mutual Funds to show all of their fees:
http://www.hreonline.com/HRE/story.jsp?storyId=45931600
"[Education and Labor Committee Chairman Rep. George]Miller's bill, the "401(k) Fair Disclosure for Retirement Security Act", also would force companies to offer plan participants at least one low-priced index fund.
Sen. Herb Kohl, D-Wis., chairman of the Special Senate Committee on Aging, is expected to introduce a version of the Miller bill..."
While the House is expected to pass 401(k) fee disclosure legislation, the bill is not expected to make it through the Senate.
And the response of one of the Lobbiest:"...the proposed rules "would dramatically increase the administrative costs paid by plan participants while overwhelming them with information that is of little practical value as they make the decision to participate in the 401(k) plan and the decision of which investment option to select."
TRANSLATION
If we tell people how much it costs we will have to charge them more.
And they won't understand it anyway.
Image if you went into a store and bought some milk. At the cash register they say they can't tell you how much it costs because then they will have to charge you more and you won't understand it anyway. (No it doesn't make sense.)
Why does making something complicated make money for businesses?http://finance.yahoo.com/expert/article/moneyhappy/64338;_ylt=A9j8aqaG0KFHGLcA1J27YWsA
RESOLUTION
"By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals." ~Warren Buffett
We may never know all the fees associated with Mutual Funds because they don't have to tell us.
Mutual Funds hide their fees and the fact that most of them can't beat an Index Fund.
Friday, January 25, 2008
Diversify?
The main point of our discussion was the different between Index Fund Fees and Mutual Fund Fees.
I compared S&P 500 (SPY) vs American Funds (AMRMX)
In this picture you will notice that both funds have many of the same stocks.
Holding the same stock should give you the same returns.
One reason Index Funds do better long-term is their lack of fees.
The Index Fund (SPY) has a fee called "Total Expense Ratio" of .08%.
Mutual Fund AMRMX has many other fees:
1) Total Expense Ratio - .55%
2) 12b-1 fee (Advertising) - .22%
3) Front Load (Sales charge) - 5.75%
4) Managers fee - .26%
5) End of year distribution - 1.29%
6) SAI fee (Statement of Additional Information) averages - 1.25%
Total if bought in 2007: 9.32%!!!
Total each year after: 2.28% minimum
What is the difference between a few percentage points in fees?
Diversify means putting your eggs in multiple baskets instead of all your eggs in one basket.
Instead of buying one stock you are buying one index fund that has many stocks.
First you become diversified by buying an Index Fund that owns a lot of different stocks.
Then you become more diversified by buying multiple Index Funds.
Later in life you become even more diversify by buying Multiple Index Funds, Bonds and other things.
Ric Edelman's Guide to Portfolio Selection (GPS) gives an example of what a well diversified portfolio looks like for someone who has over 75,000 to invest.
https://www.advisorlynx.com/secure/edelman/
It's good to read through the questions.
You do not have to put your personal information in when they ask for it.
For the rest of us, just start with a few well diversified Index Funds.
SPY - US Large Cap - Index Fund
EFA - International Large Cap - Index Fund
EEM - Emerging Markets - Index Fund
Here is some very detailed information about Index Funds:
http://www.geocities.com/Heartland/Prairie/3524/faqperm5.html
In conclusion: a Warren Buffett quote to backup our thinking:
Index funds are appropriate for inexperienced investors. In response to a question about why Buffett recommends index funds to investors, he said that for "a know-nothing investor, a low-cost index fund will beat professionally managed money." He also said he had a standing offer to anyone who could name 10 hedge funds that will beat a low-cost index fund. No one has taken him up on his offer.
Friday, November 16, 2007
401k Rollover.
TSP and 401k
I had both a government TSP and a company 401k account.
401k, 403b, TSP are all basically the same things. They are tax shelters that the government gives you so that you can save for retirement.
I had the option of keeping both TSP and 401k accounts but I wanted more control over my money. 401k's made me buy company stock and Mutual Funds. I didn't want to buy either, but the company match is worth it.
To rollover your money, or in other words move it from one tax shelter to another tax shelter you need to do the following.
1) Open a "Traditional Rollover IRA" account. I chose Scottrade because of their low fees.
2) Once your account is open, contact the holders of the TSP and 401k and tell them you want to move your money. They will have paperwork to fill out. Your HR department can tell you who holds your account.
3) Make certain you do not have them send YOU the money. They must send the money directly to your new Scottrade account. If you don't do that, then the IRS believes you "cashed out" and now you have to pay almost 30% in taxes.
4) Once the money is moved to the new Scottrade account, you now get to buy something with it.
What should I buy?
Ben Stein is one of my favorite financial voices to listen to. He has always state that people have to save more money and have a plan for that money.
The simplest plan is to spread your money equally between three diversified index funds and just keep buying them and don't sell until you retire.
3 Index Funds
VTSMX - Vanguard Total Stock Market Index (You are buying America.)
EFA - Europe Far East Asia (Foreign Developed Nations.)
EEM - Emerging Market. (Small nations that have huge opportunity for growth.)
Ric Edelman
This week I went to a Hilton in Tysons Corner and listened to one of the best financial planners in the business.
He goes through the fact that Mutual Funds (non-index) are ripping people off. The average mutual fund is costing you almost 3% a year or more.
Index funds are less than 1% a year.
Here is a great write-up by Ric about the fees of Mutual Funds:
http://www.edelmanfinancial.com/galleries/default-file/EMAPtruecost.pdf
The fees for Mutual Funds are called the Expense Ratio.
(Why can't they just call them fees?)
Mutual funds have other fees that they don't even have to tell you about called SAI charges.
SAI stands for Statement of Additional Information. You have to specifically request this information from your mutual fund.
The point is, the old way of buying Mutual Funds will severely hinder the profits. As a whole, Index Funds are cheaper and long-term they beat almost all Mutual Funds.
I would recommend listening to Ric's radio programs for free.
http://www.ricedelman.com/cs/radio_show
As always, I'm more than happy to help if you have questions.
Keep Saving, Keep Learning, Keep Investing, Retire Early!
Craig
For those who wanted a soft copy of the compounding Interest worksheet:
www.geocities.com/craigfield12/IRASheet.jpg
The book that we talked about:
The Wall Street Journal Guide to Money and Investing
For those who want an example of other portfolios:
http://madmoneymachine.com/2007/07/02/lazy-portfolios-update-1st-half-2007/
The Picture is an Example of Ric Elderman's recommendation for the information that I put into his website. Buying broad based Index funds or ETFs makes you diversified because you are putting your eggs in multiple baskets. Instead of owning 1 stock, you own 1 Index fund that has hundreds of stocks.
Everyone will have their own idea of what is being properly diversified.
The other point Rick Elderman had is that many people are using Morningstar.com to choose Mutual Funds. First of all he doesn't want you to buy Mutual Funds. Secondly everyone is choosing a Fund based on how many stars it has.
A 5 star rating is telling you that this fund has done well over the last several months. Which means you are going to buy when it is high. Human natures makes you want to buy something so you can tell people you bought a 5 star instead of a two star.
When you buy a 5 start and you don't get the returns that you thought you would get, you sell the fund and buy another 5 star. Again, you are buying high and selling low. The exact opposite of what you should be doing.
I hope our group sticks to Warren Buffet's idea for small investors. Buy a good broad based index fund and just keep buying it. We don't care what stars it has. We don't care that it goes up one week and down the next. We care that there are low fees (expense ratios), low or no management fees, no SAI fees and it is widely diversified.
Why do I have to pay more taxes in Mutual Funds than in Index Funds:
http://www.fool.com/school/mutualfunds/costs/taxes.htm
I had both a government TSP and a company 401k account.
401k, 403b, TSP are all basically the same things. They are tax shelters that the government gives you so that you can save for retirement.
I had the option of keeping both TSP and 401k accounts but I wanted more control over my money. 401k's made me buy company stock and Mutual Funds. I didn't want to buy either, but the company match is worth it.
To rollover your money, or in other words move it from one tax shelter to another tax shelter you need to do the following.
1) Open a "Traditional Rollover IRA" account. I chose Scottrade because of their low fees.
2) Once your account is open, contact the holders of the TSP and 401k and tell them you want to move your money. They will have paperwork to fill out. Your HR department can tell you who holds your account.
3) Make certain you do not have them send YOU the money. They must send the money directly to your new Scottrade account. If you don't do that, then the IRS believes you "cashed out" and now you have to pay almost 30% in taxes.
4) Once the money is moved to the new Scottrade account, you now get to buy something with it.
What should I buy?
Ben Stein is one of my favorite financial voices to listen to. He has always state that people have to save more money and have a plan for that money.
The simplest plan is to spread your money equally between three diversified index funds and just keep buying them and don't sell until you retire.
3 Index Funds
VTSMX - Vanguard Total Stock Market Index (You are buying America.)
EFA - Europe Far East Asia (Foreign Developed Nations.)
EEM - Emerging Market. (Small nations that have huge opportunity for growth.)
Ric Edelman
This week I went to a Hilton in Tysons Corner and listened to one of the best financial planners in the business.
He goes through the fact that Mutual Funds (non-index) are ripping people off. The average mutual fund is costing you almost 3% a year or more.
Index funds are less than 1% a year.
Here is a great write-up by Ric about the fees of Mutual Funds:
http://www.edelmanfinancial.com/galleries/default-file/EMAPtruecost.pdf
The fees for Mutual Funds are called the Expense Ratio.
(Why can't they just call them fees?)
Mutual funds have other fees that they don't even have to tell you about called SAI charges.
SAI stands for Statement of Additional Information. You have to specifically request this information from your mutual fund.
The point is, the old way of buying Mutual Funds will severely hinder the profits. As a whole, Index Funds are cheaper and long-term they beat almost all Mutual Funds.
I would recommend listening to Ric's radio programs for free.
http://www.ricedelman.com/cs/radio_show
As always, I'm more than happy to help if you have questions.
Keep Saving, Keep Learning, Keep Investing, Retire Early!
Craig
For those who wanted a soft copy of the compounding Interest worksheet:
www.geocities.com/craigfield12/IRASheet.jpg
The book that we talked about:
The Wall Street Journal Guide to Money and Investing
For those who want an example of other portfolios:
http://madmoneymachine.com/2007/07/02/lazy-portfolios-update-1st-half-2007/
The Picture is an Example of Ric Elderman's recommendation for the information that I put into his website. Buying broad based Index funds or ETFs makes you diversified because you are putting your eggs in multiple baskets. Instead of owning 1 stock, you own 1 Index fund that has hundreds of stocks.
Everyone will have their own idea of what is being properly diversified.
The other point Rick Elderman had is that many people are using Morningstar.com to choose Mutual Funds. First of all he doesn't want you to buy Mutual Funds. Secondly everyone is choosing a Fund based on how many stars it has.
A 5 star rating is telling you that this fund has done well over the last several months. Which means you are going to buy when it is high. Human natures makes you want to buy something so you can tell people you bought a 5 star instead of a two star.
When you buy a 5 start and you don't get the returns that you thought you would get, you sell the fund and buy another 5 star. Again, you are buying high and selling low. The exact opposite of what you should be doing.
I hope our group sticks to Warren Buffet's idea for small investors. Buy a good broad based index fund and just keep buying it. We don't care what stars it has. We don't care that it goes up one week and down the next. We care that there are low fees (expense ratios), low or no management fees, no SAI fees and it is widely diversified.
Why do I have to pay more taxes in Mutual Funds than in Index Funds:
http://www.fool.com/school/mutualfunds/costs/taxes.htm
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