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More Support for Index Funds

Comment posted to “Achieving Greater Long-Term Wealth Through Index Funds,” an interview with John C. Bogle, in the June 2014 AAII Journal.

Mr. Bogle has a very sound knowledge about investing. I am very fortunate to have my 401(k) plan through Vanguard. My plan offers both index funds and active funds as options. Although my investments are mostly in index funds, I also use a couple of active funds to balance out my portfolio. Although the index funds have lower expenses, the two active funds I use have expense ratios of approximately 0.35% to 0.45%, which is still very inexpensive. I feel that a mix of index and active funds will give me a greater chance for investment success. Of course, other fund companies charge much more than Vanguard and that could make a major difference in returns!
—Jerry Durham from Tennessee

A really great article. How can I save it for my grandchildren?

Shortly after I retired 11 years ago, I did a long calculation on my 43 years of stock market performance and I just matched the Dow Jones industrial average. I could have saved eight to 10 hours a week with an index fund (22,360 hours by 2003). The moral of the story is that unless you are in the market more for kicks than profits, you should be in index funds.
—Homer Milford from New Mexico

Charles Rotblut responds:

Near the top of every Journal article, on the left-hand side, is a section labeled “Share this article.” Below it are options to email a link to the article or to share it on social media websites such as Facebook. If you want to save a copy of the article, click on “Download printable PDF” just above under the heading “Print this article.”

Finding Securities With the PEG Ratio

Comment posted to “Valuation Ratios: The PEG Ratio,” by Joe Lan, in the June 2014 AAII Journal.

Good article. PEG is the second data point, after the price-earnings ratio, that I examine when deciding to follow or buy a stock. Low PEG ratios also help me find underappreciated securities, which has paid off many (but of course not all) times.
—Robert Jarvis from Georgia

Timing Covered Calls

Comment posted to “Assembling a Covered Call Portfolio on Dividend-Paying Stocks,” by Ben Branch, in the June 2014 AAII Journal.

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On covered calls, I generally recommend going one to three months out and one strike out of the money. For example, if your stock is currently trading at $39, sell calls going one to three months out at $40. Why? In general, the further out in time you go, options pricing is less favorable due to wider bid/ask spreads. This is caused by lower volume, which can make these trades difficult to fill at favorable prices on the short calls.

Return results, of course, will vary with performance of your selected stock. If the market goes up significantly, as in 2013, you would have been better off owning the stock outright (of course, hindsight is so easy to judge). A big drop in your stock can result in some significant losses. Do check your ex-dividend dates as if you are in the money; chances are you will be called away as the buyer of your call is looking to capture the dividend on the stock.
—Dave Samuels from California

Financial Concerns of Surviving Spouse

Comment posted to “Making Effective Use of IRAs as Part of an Estate Plan,” by Daniel Sudit and Kevin G. McCandlish, in the June 2014 AAII Journal.

I would like to see more topics on this subject. This topic is always presented in fragmented form, with a small topic here and there. I would also like to see the steps one has to go through after the death of one spouse for a spousal living revocable trust, and for a pour-over will. What are the steps that need to be taken by the surviving spouse in terms of retitling of accounts, IRAs, annuities, tax returns, etc.?
—Peter Pelz from Maryland


Discussion

Ann Hyman from FL posted 5 months ago:

Could you send me a copy of your June edition of AAII. I have misplaced my copy and it had an article bout Warren Buffett putting money into ETF for his wife. Thank you. Anne Hyman hymaxm1@bellsouth.net


Don Petterson from MN posted 5 months ago:

I found John Bogles comments very interesting. I have been an investor for a long time and have tried different methods of investing with varied success.
During the market meltdown in 2000 or was it the one in 2002 I did some research of my own. What I learned was that the simplest and best investment was Vanguards Mid Cap Index Fund, VIMSX. Check it out. Compare the performance of ANY fund against it for 1 year, 3 year, 5 year or 10 year.

Don Peterson


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