Googins Advisors Inc.
June 9, 2023
Dayton Hofmann, new employee. We welcome Dayton to our firm full-time. You may recognize him as he worked as an intern from the University of Wisconsin in our office the last two years; we enjoyed and appreciated his careful work and strong work ethic. He graduated with a degree in Personal Finance and Economics and we are pleased he has joined us.
Index Funds – Why?
Index means average.
How about ‘above average?’
And why we use index funds rarely.
Some groups claim that an index is all you need. Average may sound ok, but an index, or average, is not looking for excellent performance. Excellent performance is not the announced purpose or objective of the index fund. Just like a stopped clock is right two times a day, an index will have excellent performance every now and then.
The advertising claims: “The average manager can’t beat the index.” Easy to claim but who is trying to hire the average manager? Nevertheless, the investor is told to accept average and buy the index which is managed by a set of rules controlling investment decisions.
Another advertisement will state that the index costs you less without explaining that the savings come from a lack of robust examination of the individual companies or people involved. The savings is at a detriment to service. Companies offering index funds usually do not offer assistance when one calls for help understanding account-related questions.
Index implies the people managing and those working in the corporations are insignificant. “Business just happens.”
A good mutual fund group has many additional characteristics. They have long track records with solid returns. The history is an interesting and worthwhile study. They are forward thinking versus locked to a frozen list of items. Managers frequently invest their own money in the accounts and the expense ratio can be easily compared to Morningstar peers. One of my favorite companies, American Funds, have never closed or merged a fund over 80 years.
“Asymmetric” measurement shows an investment’s “upside capture” and its “downside capture.” …capture of gain in a bull market and capture of loss during a bear market. An index “captures 100% – 100% upside capture and 100% downside capture. Googins Advisors looks for funds that keep more of its gain in a downhill market and produces better returns with less volatility. That may be why you are surprised your accounts are higher than you expected.
Yes, we believe in excellent, better than average performance. Those funds rarely stick out short term; you must observe and live with them over time recognizing steps along the way. All in all, their mission and our mission is to improve your life through successful investing.
Here are some numbers to show you the excitement of compound interest and how an additional 1% interest can increase returns. We start with 8% but doing the compounding at higher rates is reasonable.
$100,000 invested for 10 years for 20 years for 40 years
at 8% $ 215,892 $ 466,100 $ 2,172,000
1% more – at 9% $ 236,736 $ 560,000 $ 3,140,942
Louise Googins, President, Investment Advisor
Kim Rankin, Accountant
Richard Martin, Investment Advisor
Lynne Goldsmith, Investment Advisor
Dayton Hoffmann, Associate