Re: [MLUG - DISCUSSION] Money Markets?

[Stephen Montgomery-Smith <EMAIL:PROTECTED>]

Dave Lloyd wrote:
> On Mon, 22 May 2006, Stephen Montgomery-Smith wrote:
>
> > Jennifer Dozar wrote:
> >
> > > I was wondering about money market savings accounts... I got a refund
> > > check from school and thought about putting a good portion of it into
> > > something that could turn some money back onto it.  or something along
> > > that line.  And the other part, pay off a few past accounts and maybe
> > > help with the car thing. (should still be getting like 3k from insurance
> > > for the car) I am not well versed in the financial industry. just
> > > wondered if some of you guys knew about this kind of stuff.
> >
> >
> > I used to study this kind of thing.  The conclusion I came to 10 years 
> > ago was to put money into volatile mutual funds, and don't look at it 
> > again for several decades.  I don't think this strategy has worked 
> > particularly well in the last five years, but my sense is that in the 
> > very long term this is rather a good strategy.  (Volatile means that 
> > the funds tend to go up or down more rapidly than usual.)
> >
> > If you want to do money markets, which make less money but which are 
> > much safer, my memory was that even there, no load mutual fund money 
> > markets were superior - they had slightly higher returns, and there 
> > was no minimum investment period.  The only downside is that the 
> > principal wasn't guaranteed - however if the economy were to turn so 
> > bad that money market mutual funds would decrease, then probably all 
> > those federal guarantee agencies would go bust as well.
> >
> > But as I say, these conclusions are 10 to 15 years out of date.
>
>
> Not really.  Investing in an index fund (like the classic Vanguard S&P
> 500 index fund) beats all but about 5% of mutual funds out there.  Plus
> there's almost no churn, so there's very little tax and management
> expenses going towards the maintainence.  Slow and steady still wins the
> race.

Jynx.  I invested in precisely that fund.

(I feel a bit stupid because I got that advice from a Dilbert cartoon - 
that S&P index funds were the best way to go.)


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