gtag wrote:Where looking at past performance (I know past performance does not guarantee the same future results), why can you not just invest all of your money in let us say the VG HealthCare fund? It has shown to outperform those combined in the long run. I know there are probably more factors involved.
gtag wrote:Hello everyone,
I have seen many posts talking about diversification with VG mutual funds. I do understand the theory behind it. I am having trouble understanding why you need a variety of funds to diversify, for example, having a total stock market index, total international fund index, and a total bond index.
gtag wrote:Hello everyone,
This is my first post and a relative newbie to the forum. I have learned much reading through the select few posts so far and I have gained much knowledge from many intelligent posters. I have seen many posts talking about diversification with VG mutual funds. I do understand the theory behind it. I am having trouble understanding why you need a variety of funds to diversify, for example, having a total stock market index, total international fund index, and a total bond index. Where looking at past performance (I know past performance does not guarantee the same future results), why can you not just invest all of your money in let us say the VG HealthCare fund? It has shown to outperform those combined in the long run. I know there are probably more factors involved. I am very interested in hearing your comments.
gtag wrote:I appreciate your reply. It is very informative for me. Don't you feel that the health care sector will always be needed (i know so does food and transportation, etc)?
No worries here. I thought this is a learning forum- just trying to learn as much as I can especially from investors who have been around doing this for a while. So I will pose the same question to you as a did a couple other posters here and add one question. First, if you had 20-25 years until retirement, what types of funds would you invest in and what percentages would you put in each fund? Second, what information do you use when evaluating mutual funds? Thank you.
I appreciate your reply with your knowledge and personal experiences. I am just curious and if you do not want to answer because it is personal, I completely understand. Why can't you invest in a Total World Stock and a Total Bond fund for yourself? I think in your earlier reply, at least in the Total Bond fund, is because it is not offered, correct? Why not in a Total World Index Fund- I think VB offers one don't they? I know in your first reply to me that you are not a fan of past performance when looking at funds, correct? Do you look at any information when choosing a fund? Do you believe sector funds are a waste of time and why? I just like to know because I like gathering as much information as I can to help me along the investing track from investors like you who have many experiences and knowledge to share. Thank you for sharing your information with me and other viewers.
Thank you again. I appreciate the information and knowledge. I do not want to assume what you are thinking. If I can deduct some theories from some of your earlier comments, do you feel that it is better to try to match the entire investing market as possible minus the lowest possible expenses because you feel, in general, it is better to try to match the returns of the market as close as possible (if you can not beat them join them)? And that, sector funds which may be profitable at times but in the long run will not match the entire investing market? Again, just trying to gather as much investing knowledge as possible. I will be gone for a little while today so I may not be able to reply until latter.
I also appreciate your comments. It is also a good point you bring up with your comments,"grabiner wrote:The sector will always be needed, but everyone else knows that as well, so the expectation is already priced in. As a result, investors are willing to pay more today for $1 of lower-risk earnings in the health-care sector or the utilities sector than for $1 of earnings in the higher-risk financial sector. (M* category averages: price/earnings is 17 for health care, 16 for utilities, 10 for financials.)
And health care does have its own risks, particularly government regulation. Changes to Medicare can have a major effect on health-care stocks in the US.
I know what you are saying about Medicare changes. I think they just said recently in the news that Medicare payments would be increased more to the medical community. However, as you have stated, how do we know in the future that this will be the case?
I will ask you as well as some of the other posters and anyone else willing to chime in on my question. If you had 20-25 years to retirement, what funds and percentages of those funds would you invest in now?
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