The value is in the plan, not the products

“How do I pick the best mutual funds amongst all those available?”

By Byron Moore, posted November 6, 2017

Originally published in the News Star and the Shreveport Times on Sunday, November 5, 2017.

Question: How do I pick the best mutual fund amongst all those available? I read about so-called actively managed mutual funds and some people like them. Others think passively managed funds are best. I’m afraid I’m a bit confused by the whole discussion. Which is the best kind of fund to choose?

Answer: Have you ever watched an all star game?

mutual fundsThe concept sounds great. You get the best players on each team in the league, split them into two teams made up of these all-star players and let them compete. Every major sport has an all-star game of one sort or another. It’s a great idea.

Unless you’ve ever watched one.

What fans are usually treated to is a game in which the world’s best players perform at a very mediocre level in a pretty boring game.

What’s the problem? The players are all-stars. But the teams are novices.

But for the week of the game, the athletes have never played together, practiced together, gotten to know one another nor formed any significant chemistry together as a team. In fact, these are not really teams – they are just collections of all-stars.

Most knowledgeable observers would agree that a team made up of mediocre players would stand a pretty good chance of defeating most all star teams. That’s because the team matters more than the individual players.

We would do well to adopt that same view regarding mutual funds (or any other category of financial product). Doubtless there are some that are better than others…much better. There’s no good reason to have laggards on your team if you don’t have to.

Managers of passively managed mutual funds believe that in the long term it is nearly impossible to beat the returns of the market. As a result of this belief, these managers seek to simply mirror a particular market index, so as to mirror its investment returns. The most common of these market indexes is the S&P 500. This focus allows passive managers to offer very low costs to the public.

Managers of actively managed mutual funds believe the market is not completely efficient. If a manager can uncover an area in which the market is over or under sold, he may be able to outperform a particular index.

Which is better? Which is the all-star player? Ask me in 30 years.

What I do know today is that the team matters more than any individual player.

The “players” are the individual component parts of your financial life – the products and services you use to try to get ahead financially. Yes, these do include mutual funds (actively or passively managed). But they also include mortgages, insurance products, retirement plans, pensions, Social Security, savings, bank accounts, real estate holdings and business interests.

The “team” is your plan. Your financial plan. A coordinated financial plan balances and directs (coaches) all the individual parts (products) in your financial life.

Don’t let a couple of ego-centric all-stars (actively and passively managed mutual funds) set the agenda for your financial priorities.

Focus on putting together a championship team – a world class (but personalized) financial plan, oriented around your life goals and dreams. Once you got a game plan for your team, you can turn you attention to backfilling the plan with the best players (products) you can find.

Plan first. Products a distant second.

Argent Advisors, Inc. is an SEC registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

About

Argent Financial Group

Celebrating its 30th anniversary in 2020, Argent Financial Group (Argent) is a leading, independent, fiduciary wealth management firm. Responsible for more than $30 billion in client assets, Argent provides individuals, families, businesses and institutions with a broad range of wealth management services, including trust and estate administration, investment management, ESOPs, retirement plan consulting, funeral and cemetery trusts, charitable organization administration, oil and gas (mineral) management and other unique financial services. Headquartered in Ruston, Louisiana, Argent was formed in 1990 and traces its roots back to 1930.

Latest News & Resources

Insights

Retirement Times December 2020 Newsletter

Retirement Times December 2020 Newsletter

December 2020 This month's Retirement Times discusses post-election commentary. Stock markets abhor uncertainty. Currently, investment prognosticators are interpreting the election results to create a relatively “stagnant” legislative environment. Download the...

Why Eulogy and Resume Virtues Matter In Estate Planning

Why Eulogy and Resume Virtues Matter In Estate Planning

THIS ARTICLE IS FIRST IN A FOUR-PART SERIES THAT EXPLORES ESTATE AND LEGACY PLANNING.   When I talk to individuals and couples about estate planning and the legacy they want to leave behind, I often ask them: How do you want to be remembered? It’s not an easy...

Argent Employee Spotlight – Melissa Garner

Argent Employee Spotlight – Melissa Garner

Meet Melissa Garner, who is with Argent Trust in Shreveport and has been with us for 14 years.   Q. What led you to Argent and what makes it unique? A. I came to Argent fresh out of grad school, looking for a company that I could have a career with. I found it! I...

Interested in speaking with

one of our experts?