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.