small percentages pack big punches

Chapter Notes:

• with just three index funds your money can be spread over nearly every available global money basket
1. a home country stock market index
2. an international stock market index
3. a government bond market index

• Paul Samuelson: "the most efficient way to diversify a stock portfolio is with a low fee index fund"

• How actively managed funds work
1. your adviser takes your money and sends it to a fund company
2. that fund company combines your money with those of other investors into an active mutual fund
3. the fund company has a fund manager who buys and sells stocks within that fund hoping that their buying and selling will result in profits for investors

• 5 factors dragging down returns of actively managed US mutual funds
1. expense ratios
2. 12B1 fees
3. trading costs
4. sales commissions
5. taxes

Discussion with parents:
           After last class when we learned about the benefits of an index fund I really got thinking about active versus passive investing.  I talked with my parents about my funds and learned that I have a actively managed funds for when I turn 21.  And since my mom has also read "A Millionaire Teacher" she was of like-mind when I discussed what I learned with her from chapter three.  Thus we both agreed that we should convert my actively managed bonds into passively managed bonds, however we were both unsure on how to convert our funds from actively managed funds to index funds.
This Article: http://knowledge.wharton.upenn.edu/article.cfm?articleid=2702 further enforces what I learned in chapter three.  About how financial advisers will advise investors to buy actively managed funds even though index funds often perform better.  They do this because index funds will allow them to earn more profit.

Finance Tracking:
    I have finally finished converting my finance tracking from my journal to excel.  I was surprised to see how much my total was, an astonishing $5,000.  Besides my interim costs, what added mostly to my monthly costs was my groceries cost.  It far outweighed my personal spending at school or on the weekends.