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Ask Dave

Why Not Invest In S&P 500?

Dave says that Paul can own several mutual funds that beat the S&P whether it's an up-market or a down-market.

QUESTION: Paul asks why Dave suggests diversifying over four types of mutual funds instead of the S&P 500.

ANSWER: I recommend mutual funds because they always beat the S&P.  You can own several funds that beat the S&P whether in an up-market or a down-market.  It’s alright to own some SNP, but none of your retirement savings should be in that.  If you do a little bit of looking you can find tax-protected Roth IRAs and 401-Ks that give much better returns than the S&P.  

For example, take a mutual fund with a 25-year track record.  Over the course of those 25 years if you can see that the mutual fund almost always beats the S&P, then that mutual fund contains stocks that are winning more than the overall market is winning.