Dynamic investments

I keep an eye on my 401k. Out of boredom, I usually check it once a day during the week. The daily fluctuations are hundreds of dollars. Keeping track of it with Excel, and excluding my contributions and employer matching, it’s been gaining except for one day when it was down $46 since I started keeping track. I think the relative gain (less contributions) is up around $500 over the last two months. I assume that the fund manager makes changes to the portfolios from time to time, but how often?

If someone knows a bit about investing, I assume that he could micromanage an account so as to increase profits by selling when the trend is up and selling when it’s down. Are there any funds that do this? While I pay no fees, it seems to me that higher balances in 401ks would be good for the fund manager as well as the fundholder since they’re obviously paid somehow.

I know that there are funds that are tied to indices (and I think mine are), but without knowing how it all works it seems to me that they could be quicker on the stick.

It depends entirely on the fund. Some have investing strategies that require more active trading than others. Some are index funds which change their holdings only when the underlying index changes–for example, when stocks are changed within the S&P 500.

Bad assumption. If it were that easy, every fund would do it, which would change prices so that the easily spotted trend disappeared. Also, there are transaction costs associated with every trade.

Certainly, there are actively traded funds that incorporate technical analysis as one element in their strategy. I’d be skeptical of any fund that traded on that basis alone, although I imagine there are some. (Whether or not they’re successful is another story.)

Index funds are passive; they have no stick to be quick on. They change when the stocks in the index change. Actively managed funds can be quicker, but I strongly caution you against an assumption that more trades are better. The literature on buy-and-hold versus trying to time the market is extensive, and the question will probably never be settled to everybody’s satisfaction.

This might be a Great Debate but the entire managed fund industry is mostly a sham. It simply can’t be done on any consistent basis. There are thousands of funds out there. The vast majority of them lag the relevant index just because of the costs involved with an actively managed fund. It is considered a big achievement to beat a relevant index (beat doing nothing) and out of thousands of funds, a few will inevitably beat the indexes for a few years in a row and be held up as financial geniuses. Then, the laws of chance will catch up and those will usually lag too.

I am not saying that it can’t be done in any case (Warren Buffet seems one of the few that can pull that type of thing off) but the track record of the entire managed fund industry is abysmal as opposed to just passively managed money.

Mutual funds aren’t going to be insane traders. They trade often, but dont engage in short-term market timing. Some hedge funds would, but the entry price may be a bit high for you. And I doubt you want your retirement resting on the market timing skills of a hedge fund manager.

Personally I like index funds, although some here would tell you that you need to be in an actively managed fund. You would know if the fund was tied to an index if the name was something like Fidelity S&P 500 or Fidelity Russell 2000 index.

Not germaine to the OP, but:


Sure, you can do that, but it’s not the easiest thing in the world. If you Buy Low and Sell High, you’ll make a fortune, but how do you know what is High and what is Low?

A friend of mine from college was obsessed with the stock market and spent years perfecting an evaluation model that looked at the fundementals of companies as well as the trend of its stock. Eventually he convinced a bunch of us to kick in $1000 each and he started trading stocks, options, whatever. Well, I wrote the money off but a few years later he sent me a check for $1.2 million dollars. Last I heard he was shopping for a private island in the South Pacific.

Read your prospectus’. They will tell you how the fund is trading and what kind of market timing is being utilized.

For the individual fund holder, the most that can realistically be done is to rebalance the portforlio frequently. The problem is that normally you can only move in and out of the various funds at the end-of-day price. That seriously inhibits the ability to effectively use market timing.

There are a few hedge fund “quant” guys out there using “black box” trading that are doing well.

Much of the hedge fun industry is a bunch of hotshots using leverage and fundemental trading to cook up some temorarilly impressive results. Many of those will eventually crash and burn their investors money while they have skimmed their fees and parked them elsewhere. Buyer beware!

By the way, a guy at my job used to have the option of investing in company stock through the 401K fund, and he used it all the time.
Our stock has very hard “bounds” around 28 and 43, and lots of news events that usually relate to a SMALL segment of the
Never seems to go below the 28 for more than a few hours, or above 46 for more than a week.
Whenever it got below 32 he’d sell off the money he kept in a bond-based fund and put it into company stock.
Whenever it got above 41, he’d sell it off and put the money back into the bond fund, making 5-7% until the next price shift.
Company was paying the transaction fees… finally put some restrictions on how many “round trips” your money could make in a year.
Guy made a few thousand doing this before they changed the rules…