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Managed Funds vs. Index Funds: Which is Right for You?

In the world of investing, there are many different options to choose from. Two of the most common are managed funds and index funds. But what's the difference, and which one is right for you?


What are Managed Funds?

Managed funds are investment portfolios that are actively managed by a financial advisor or team. The goal of the manager is to outperform the market by selecting specific investments that they believe will generate higher returns. [00:08]


What are Index Funds?

Index funds, on the other hand, are designed to track a specific market index, such as the S&P 500. Instead of trying to beat the market, index funds aim to replicate its performance.


The Performance Debate

According to the video, about 95% of managed funds have underperformed the S&P 500 over the past 20 years. [02:15] This isn't necessarily due to a lack of skill from financial advisors, but rather the efficiency of the market. [02:26, 02:38] It's difficult for managed funds to consistently beat the market because as soon as a stock performs well, its price becomes transparent, attracting more investors and lowering the potential yield. [02:44, 02:51] To outperform consistently, advisors would need to predict winning stocks year after year, which is highly improbable. [03:10, 03:26]


The Fee Factor

Managed funds typically charge a 1% fee for assets under management, which covers salaries and operational costs. [03:55, 04:04] To justify this fee, the fund needs to consistently beat the market by at least 1%, which is a significant challenge. [04:21, 04:50]


The Role of Financial Advisors and Coaches

The video suggests that the first sign of a good financial advisor is their transparency about the challenges of beating the market. [05:06] While most people may not need a financial advisor for investment management, they can be helpful for sophisticated investors or for occasional check-ins to understand portfolio performance within the broader economy. [05:13, 06:02] Be wary of advisors who constantly change your portfolio or promise overly complex strategies. [06:23, 06:29]

Financial coaches differ from financial planners by focusing on accountability, helping individuals stick to their chosen investment strategies, budgeting, and saving plans, rather than providing in-depth technical market expertise. [07:0407:58]


Long-Term Perspective

For long-term financial goals like retirement, it's crucial to research the long-term performance of managed funds compared to the broader market rather than trying to chase short-term gains. [08:33, 08:46]


Coda Financial Coaching

At Coda Financial Coaching, we understand that navigating the world of investments can be overwhelming. We're here to provide you with the guidance and support you need to make informed decisions about your financial future. We can help you:

  • Develop a personalized investment strategy

  • Stay on track with your financial goals

  • Understand the pros and cons of different investment options

  • Make informed decisions about your financial future


Contact us today to learn more about how we can help you achieve your financial goals.


Summer travel offers a fantastic opportunity to explore and create lasting memories. However, with rising costs, especially for families and groups, it's crucial to be financially savvy. This post, inspired by expert insights, will guide you on how to get the most value out of your summer adventures in the US, focusing on budget-friendly and enjoyable experiences.


Road Trip vs. Flying: The Current Landscape

[01:15] Currently, road trips may be more advantageous than flying. Airline strains, delays, and high costs can quickly inflate your travel budget. If you're considering a road trip, ensure you have a reliable, fuel-efficient used car to minimize expenses. [01:53]


Strategic Timing for National Park Visits

[02:26] To avoid the crowds and potential inconveniences, consider steering clear of major national parks during peak times – particularly major and regular weekends throughout the high summer season.


The Sweet Spots: Weekdays and Shoulder Seasons

Visiting national parks on weekdays can significantly reduce crowd sizes. Additionally, the shoulder seasons (early to mid-May or mid-September to early October) offer a winning combination: pleasant weather and fewer tourists, as kids are typically in school. [03:32]


State Parks: Your Budget-Friendly Alternative

[04:13] For travelers mindful of their budget, state parks are an excellent option. Often located within a day's drive, they are generally more affordable and less crowded than national parks, without compromising on natural beauty. For day trips, remember essentials like a CamelBak for water and snacks. [04:51]


By following these tips, you can enjoy a fulfilling and memorable summer travel experience without straining your finances. Happy travels!

In times of economic uncertainty, making sound investment decisions can feel daunting. This video offers guidance on how to approach investing during such periods, providing strategies for both long-term growth and those seeking safer options.


Key Takeaways:

  • Stay the Course with Stocks: For those with a long-term investment horizon, particularly in retirement planning, remaining in the stock market is recommended. A total stock market index fund is suggested as a solid foundation for your portfolio [01:11].


  • Defensive ETFs for Stability: If you're looking for more defensive investment options, consider ETFs that focus on sectors less sensitive to economic downturns [05:07].


  • Vanguard Staples Index Fund (VDC): This ETF concentrates on consumer staples, companies that provide essential goods and services, such as Walmart and Costco [02:47].


  • Healthcare and Utilities ETFs: Other defensive sectors to explore include healthcare and utilities, which tend to remain stable even during economic fluctuations [03:59].


  • Avoid Treasury Bonds: It's generally advised to avoid moving funds into treasury bonds or short-term bonds, especially if your retirement is more than 10 years away [05:14].


  • Dollar-Cost Averaging: Continue to invest consistently over time, regardless of market conditions. This strategy, known as dollar-cost averaging, can help mitigate risk and potentially lead to better returns in the long run [06:10].


Conclusion:

In this video Alex emphasizes the importance of a long-term perspective when it comes to investing, particularly during times of economic uncertainty. By focusing on diversified investments and considering defensive sectors, you can navigate market fluctuations while working towards your financial goals.


What are your thoughts on this? What budgeting tips do you find helpful during times of economic uncertainty? Share your thoughts and questions in the comments below! If you need personalized help or have questions, please don't hesitate to reach out.

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