Delray Beach woman victim of the ‘Geek Squad’ email scam
Delray Beach resident Diane Belz lost $1,800 to the “Geek Squad” email phishing scam.
Tronc – Sun Sentinel, Tronc – Sun Sentinel
You buy into a mutual fund or exchange-traded fund and expect to earn the same investment result. But invariably that doesn’t happen, and investors usually are the ones coming up short.
This lag in performance can be sizable, as researcher Morningstar discovered in its latest “Mind the Gap” study. If your stock fund earns 8% one year, for example, your own results might be closer to 6% or 7%.
How can you underperform the exact same fund that you own? Poor decisions explain a big part of it. Simply put, many people don’t just buy into a fund and then leave their money alone. Instead, they buy and sell along the way.
For the most part, “It boils down to the timing of purchases and sales into and out of funds,” said Jeffrey Ptak, Morningstar’s chief ratings officer.
In other words, poor timing decisions can easily chop one-fifth off of your return in a typical year.
Investors frequently buy or sell funds based on their reported total returns. These performance results for mutual and exchange-traded funds assume that a person has made a lump-sum investment on day one and held tight to the end, neither adding nor subtracting money. They also assume all dividends are reinvested, which might or might be the case for an investor in reality, and they assume management expenses and other costs have been deducted.
How much will I get after 10 years in mutual fund?
In Morningstar’s latest study, investors earned about 6% annually over the 10 years ending Dec. 31, 2022. The funds themselves generated an annualized average gain of 7.7%, including reinvested dividends and subtracting costs.
The lag of 1.7 percentage points is similar to gaps of 1.5% to 1.7% that Morningstar calculated in four previous studies spanning earlier 10-year periods.
“In my opinion, this is one of the most important studies Morningstar publishes, because it shows that what you see isn’t always what you get when it comes to fund returns,” said Amy Arnott, a portfolio strategist with the company.
Timing mistakes, along with investment expenses and taxes, are among the critical factors that can influence a person’s end results. And unlike actual gyrations in the stock and bond markets, they are something over which investors exert at least some control. (Regarding taxes, there are ways to minimize the bite, and with expenses, it is easy to find low-cost products.)
Returns for investors almost always will differ from a fund’s reported results unless a person makes no additions or subtractions during the entire holding period, Morningstar said. The more volatile a fund, the more difficult it typically is for investors to maintain a hands-off approach.
Responsible, disciplined strategies can lag, too
Sometimes, even sound approaches like investing on a regular basis can backfire, at least comparatively speaking.
Suppose you want to dollar-cost average by staking $1,000 into the same fund at the beginning of each year, for three years. Suppose, further, that the fund goes on to earn 10% the first year and 10% the second year before dropping 10% in year three. For the fund, that works out to an annualized return of 2.9%. But the investor sustains an overall loss of 0.4%. The reason?
“There was less money in the account during the first two years of positive returns and more money exposed to the loss during the third year,” Morningstar said.
A strategy of investing money on a regular basis, as when diverting a portion of your paycheck into a workplace 401(k) retirement account, is a laudable behavior, Ptak said. Still, it will give you a different end result compared with the fund in which you’re placing money. So, too, with regular, ongoing withdrawals.
Investor returns rarely will match a fund’s results exactly, since few people can buy and hold for years. But the performance-gap study shows several ways to improve your results.
One is to avoid adding a lot of money after a fund has had a nice rally. Another is to avoid selling at a price that could be near the market bottom. In addition, investors should consider automating tasks like rebalancing as much as possible, perhaps by doing it on the same day each year. (Rebalancing involves adding a little money to lagging funds while taking some chips off the table with funds that have performed especially well, to keep your overall mix or allocation in line with your objective.)
Also, investors should consider sticking with more widely diversified funds and avoiding sector portfolios that hold fewer stocks, typically in one or a few industries like technology. These funds bounce around a lot more, making it harder to resist the urge to buy and sell. Conversely, more diversified funds such as asset-allocation portfolios, which typically spread their holdings among stocks, bonds, cash and perhaps other areas like real estate, deliver a smoother ride, making them more suitable for a long-term, buy-and-hold approach, Morningstar said.
In fact, investors suffered their lowest performance gap with asset allocation funds, among the categories that Morningstar studied, and the highest amount of lagging performance with sector portfolios.
Because of their smoother rides, asset-allocation and other widely diversified funds “do seem to be the easiest for investors to use,” Ptak said.
Reach the writer at russ.wiles@arizonarepublic.com.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
