How “Minding the Gap” may add millions to your portfolio

Sound Investing

In this podcast, Paul talks briefly about his upcoming 2-1/2-hour workshop, “The Ultimate Buy and Hold Strategy — on Steroids!” for the Puget Sound AAII Chapter on September 25, as well as the September 30-October 1 virtual AAII National Conference. For more information and to register for the Conference, click here.

Paul answers the following questions from subscribers to his free newsletter:

1. Have you done a study to compare the long-term returns of an All Blend vs. All Value Portfolio?
2. Will an actively-managed small cap value fund produce enough premium to be worth the higher expense ratio?
3. Are you considering adding a Monte Carlo simulator to your calculator? What about the ability to test 2 Funds for Life?
4. Which of your portfolios do you recommend for investors who want to “swing for the fences?”

He discusses this article from Morningstar, “Why Fund Returns Are Lower Than You Might Think,” which includes the results of the annual “Mind the Gap” study. Closing this gap may add several million dollars to the lifetime return of your portfolio. The study also address the impact of dollar cost averaging vs. lump sum investing.

Finally, Paul considers a blog by Ben Carlson titled, "What Have the Stock Market Taught Us Since 2010?" which highlights the challenges of drawing conclusions from short periods of time. Many investors have probably learned exactly the wrong lessons, and lessons about bear markets may be some of the most painful lessons.