Putting purpose before product

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Putting purpose before product

Postby Rick Ferri » Thu May 02, 2013 9:49 am

What funds should you buy? Should it be index funds or exchange-traded funds, or low-cost actively managed funds, or should you pay an adviser for access to special products like DFA funds? This is an important question — but it’s often the wrong question. The products used to construct a portfolio are a function of a portfolio’s purpose. Get the purpose right first and then select the product.

When Fund Selection is Done Right

Rick Ferri
Choose a few low-cost index funds in different asset classes, rebalance occasionally, and forgetaboutit!
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Re: Putting purpose before product

Postby EternalOptimist » Thu May 02, 2013 2:35 pm

Good one Rick...begin with the end in mind.
"When nothing goes right....go left"
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Re: Putting purpose before product

Postby Rick Ferri » Thu May 02, 2013 8:53 pm

Just trying make sure we don't put the cart before the horse. :wink:

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Re: Putting purpose before product

Postby hq38sq43 » Thu May 02, 2013 9:01 pm

"Perhaps the commonest stupidity is forgetting what one is trying to do."

Friedrich Nietzsche
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Re: Putting purpose before product

Postby bertilak » Fri May 03, 2013 7:59 am

"A solution in search of a problem" -- a pejorative aphorism common in various technical industries.
I have a strong moral sense - by my standards. | -- Rex Stout
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Re: Putting purpose before product

Postby baw703916 » Fri May 03, 2013 8:13 am

Rick,

You mention in the column that "there are some [asset classes] that work better in an actively-managed fund." Which ones are those?

Thanks,
Brad
Most of my posts assume no behavioral errors.
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Re: Putting purpose before product

Postby Rick Ferri » Fri May 03, 2013 8:16 am

Municipal bonds, high yield bonds, emerging market debt.

My active management I'm referring to a broadly diversified, low-fee fund that is not cap weighted.

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Choose a few low-cost index funds in different asset classes, rebalance occasionally, and forgetaboutit!
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