2017 Top Funds Guide

Comment on “The Individual Investor’s Guide to the Top Mutual Funds 2017,” by AAII staff, in the February 2017 AAII Journal.

Where do you find the R-squared numbers?
— William Nutter from Minnesota

The editors respond:
Click on Expanded Fund Data at the online version of the article on AAII.com. R-squared numbers are included on the Portfolio tab of each fund’s detailed report (accessed by clicking on a fund name or ticker in the interactive tables) and also in the Expanded Fund Listings Spreadsheet and in the Risk-Adjusted Returns table.

Mutual funds should only be used if you have no other choice (like me in my HSA account) and for investments where you are not comfortable doing the research or not able to get adequate information.

The fact is that the vast majority of mutual funds significantly underperform their respective markets. Many have high fees which erode your long-term return.

Chasing one-year performance is a fool’s game. If you do buy a fund, buy one with a consistently good long-term track record and that can protect your investment the best in a falling market.
— Peter Rukavena from New York

Very much appreciated!
— M. D. Cunningham from South Carolina

Taxes and QCDs

Comment on “Strategies for Unneeded RMDs,” from the Briefly Noted column in the February 2017 AAII Journal.

If you are going to make charitable donations anyway, the qualified charitable donation (QCD) path will reduce your adjusted gross income (think taxes) as well as dealing with your required minimum distribution. Making donations from your income will provide a deduction, but also provides a higher AGI than you would receive by using the QCD.
—Bob from Indiana

I understand the value of a QCD to reduce the AGI and its effect on Medicare premium. But if I’m filing the 1040 long form because I have enough deductions, then not doing a QCD means more income but more deduction to offset the added income. In this aspect a QCD has no benefit. Am I missing something?
—Dick from Wisconsin

Charles Rotblut, CFA, responds:
If the charitable contributions increase your itemized deductions by the same amount as your income is increased by not using the qualified charitable distributions, it may even out from a tax standpoint. I would suggest reading “The Tax Advantages of Qualified Charitable Distributions From IRAs” in the October 2016 AAII Journal for more on using QCDs.

Hazards of Subtle Cognitive Aging

Comment on “Cognitive Aging Creates Financial Obstacles,” from the Briefly Noted column in the February 2017 AAII Journal.

Cognitive aging is a real problem for a significant number of people, despite examples of others who remain mentally sharp their whole lifetime. Adding to that risk, an individual investor may not be self-aware of gradual cognitive impairment, and may imagine that he or she has more financial competence than is objectively the case.
—Dave from California

Meditation for Improved Investing

Comment on “The Role Meditation Can Play in Investing,” by Jason Voss, in the January 2017 AAII Journal.

I was pleasantly surprised to see an article on meditation in an investment journal. Jason Voss’s article was quite an informative and well-researched overview of the subject. I’ve explored many different meditation techniques over the decades, but I wasn’t aware that there are smartphone apps available. What a new “techie” approach to an ancient practice.

I agree with Voss that meditation is a wonderful way to focus one’s attention on the important aspects of portfolio management, instead of being sidetracked by my own mental chatter and talk about the next devastating bear market.
— Thomas Starbard from Oregon