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Letters: Reader finds fault with advice on portfolio management
Published 12:00 am PDT Sunday, May 11, 2008
Story appeared in BUSINESS section, Page D3
Re: "Ask the Experts" column by Bruce Kajiwara, May 4.
I found Mr. Kajiwara's response not very helpful, somewhat confusing and not completely accurate in places.
My criticisms are:
• He says "the proper asset allocation may have a significant impact … . " It would have been useful to give some insight into what a "proper asset allocation" consists of.
• He also says the questioner should have more asset classes than the six cited, such as adding a mid-cap asset class and dividing international into three sub-classes. He did a similar thing for bonds. Unless one has a high-valued portfolio, say more than several million, the original six asset classes is sufficient for most people.
• My third point is his recommendation to go beyond index funds and consider "mutual funds, exchange-traded funds and individual securities." First, the vast majority of exchange-traded funds are index funds. Second, index funds can be bought in the form of a mutual fund. Reading between the lines, Mr. Kajiwara is proposing adding actively managed mutual funds as well as individual stocks to the questioner's portfolio.
Academic studies have demonstrated that most people don't beat the market going this route, in fact do considerably worse, so are better off populating their portfolios with index funds. To venture into stocks and actively managed mutual funds requires lots of due diligence to be successful, something most people don't have the time or inclination to do well.
– Ron Byrd
Sacramento
About the writer:
- Send letters to: Business Editor, The Sacramento Bee, P.O. Box 15779, Sacramento, CA 95852, or fax to (916) 321-1009, or e-mail to sacbiz@sacbee.com
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