{"id":5526,"date":"2013-01-03T12:59:30","date_gmt":"2013-01-03T20:59:30","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=5526"},"modified":"2016-12-21T07:30:48","modified_gmt":"2016-12-21T15:30:48","slug":"driving-a-compact-down-wall-street","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/driving-a-compact-down-wall-street\/","title":{"rendered":"Driving a Compact Down Wall Street"},"content":{"rendered":"

High-end sports cars are great. They’re fun to drive and fun to look at. Who doesn’t turn their head when a fancy Lambo or some exotic supercar pulls alongside in traffic?<\/p>\n

And there’s the rub. That guy, with all his horsepower and sheer automotive brawn, is stuck in the same line of cars as the dumpy Volvos and lumbering trucks.<\/p>\n

Even if things opened up, he’d roar up to the speed limit and, if he’s smart, stick there. Certainly, the cop in the unmarked car is watching for fast-moving, low-slung adrenaline-mobiles like his.<\/p>\n

\"\"<\/a><\/p>\n

The world’s best-selling modern car? Hands down, the Toyota Corolla. Thirty-nine million of them sold since the mid-1960s.<\/p>\n

It’s not surprising. A new Corolla costs $16,230 and gets 34 miles highway, 27 city. Four doors, five seats and a trunk. A 2012 Lamborghini Gallardo runs up to a quarter-million bucks and gets you 18 miles per gallon on the highway, 11 in the city.<\/p>\n

What’s the point? To look good? Get there faster? Nope, not really. The point of a Lamborghini, or any car of its kind, is to\u00a0show off to the world your disposable income<\/a>.<\/p>\n

A big flashy car is little more than a billboard you hold over your head that says, “Money means nothing to me.” Nice place to be, I suppose. But most of aren’t going to live that lifestyle, now or ever.<\/p>\n

Retirement\u00a0savers need to own the investment-world equivalent of a Corolla. And they are starting to realize it. Exchange-traded funds (ETFs) are fast on their way to overtaking the retirement market. In 2012, assets under management in\u00a0ETFs\u00a0zoomed up to $1.34 trillion.<\/p>\n

By one estimate, they will surpass the $9 trillion in actively managed mutual funds in 12 years. Faster, of course, if the money in them is coming out of those active funds. About half of the $130 billion in assets put into\u00a0ETFs\u00a0in 2012 came from equity funds,\u00a0reports CNBC<\/a>.<\/p>\n

The danger becomes driving that compact car as if it were a Lambo. As Jack Bogle, founder of The Vanguard Group, has lamented, turnover in the S&P 500 is now ridiculous thanks to\u00a0trading in the biggest ETF ticker SPY<\/a>, which tracks the index.<\/p>\n

Vanguard found in a study that owning the market via a simple index fund had the unfortunate effect of tempting people to trade it, rather than own it \u2014 something like 25% more likely.<\/p>\n

Drive by Wall Street in style<\/h2>\n

So what you have, increasingly, is a highway full of Corollas but drivers who envision themselves stomping on the\u00a0accelerators of sports cars. What could possibly go wrong?<\/p>\n

The way to safety is pretty simple: You drive a Corolla to work, and you rent a Lambo once in a while for a joyride. That’s what a truly diversified portfolio looks like. It’s mostly big U.S. stocks and bonds, with a dash of hard assets such as gold, real estate, and commodities, plus foreign stocks on top. All in the form of inexpensive\u00a0ETFs.<\/p>\n

When things rev up and your exotic assets pull ahead, sell a portion off and bank the proceeds back into gas money for the safe, economical, workaday fund.<\/p>\n

You’ll find\u00a0you can get to retirement safely and on time<\/a>\u00a0and, importantly, you’ll arrive in grand style. That’s having the last laugh for sure.<\/p>\n","protected":false},"excerpt":{"rendered":"

High-end sports cars are great. They’re fun to drive and fun to look at. Who doesn’t turn their head when a fancy Lambo or some exotic supercar pulls alongside in … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":5527,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[4],"tags":[],"yoast_head":"\nDriving a Compact Down Wall Street | MarketRiders.com<\/title>\n<meta name=\"description\" content=\"You'll find you can get to retirement safely and on time and, importantly, you'll arrive in grand style. 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