Category Archives: Choosing Investments

Active vs. Passive Investing

checkbookDana Anspach has been’s MoneyOver55 Expert since 2008. She is also a contributor to MarketWatch as one of their RetireMentors, and the author of the book Control Your Retirement Destiny (Apress 2013), which is written specifically for the 50+ crowd to provide practical, how-to knowledge on what to do to get your finances in order to prepare for a transition out of the workforce.

Many people have a difficult time adjusting to the idea that index investing is actually better for them than trying to find someone who can sell them something that will beat the market, or who can beat the market for them.  The statistics suggest it is highly unlikely either will actually happen.

Read the article, and see what a seasoned financial planner and columnist for people over 55 has to say.


What Is The Difference Between Active and Passive Investing? 

by Dana Anspach

Active investing is like betting on who will win the Super Bowl, while passive investing would be like owning the entire NFL, and thus collecting profits on gross ticket and merchandise sales, regardless of which team wins each year.

Active investing means you (or a mutual fund manager or other investment advisor) are going to use an investment approach that typically involves research such as fundamental analysis, micro and macroeconomic analysis and/or technical analysis, because you think picking investments in this way can deliver a better outcome than owning the market in its entirety.

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Now is a great time to think about what we don’t know about investing…

Another year has flown by and many people are making New Year’s resolutions that will fade well before January ends. Prognosticators are out in droves telling us what will happen with everything from how we will dress to when the world will end. There will be people in the financial circles telling us the economy and the stock market will go up, or the economy and the stock market will go down. And, of course it will. The truth is no one really knows the future.

When it comes to investing there seems to be quite a lot we don’t actually know so I thought it would be a good time for us to review a great article by Allan Roth titled “5 things to know you don’t know about investing.” Some writers have the gift of explaining things simply so we can all ‘get it’. Allan is certainly one of those writers! Some of you have already seen this article since it is now in my handouts for our ‘Get Acquainted’ meetings. The wonderful message in the article is not only that you and I don’t know these things, but that no one does. So if you happen to be talking to a friend, neighbor or even a person that claims to be an expert, and they start to act like they know all about those things – hang on tight to your wallet and run away quickly.

A little knowledge about what you don’t know can be a very powerful thing. I hope you enjoy the article!

Can Gold be Hazardous to Your Wealth?

If you watch any of the financial or news channels, you have certainly seen the gold and silver commercials –there’s one in every break! Their job is to scare you to death and entice you into making what could be a very poor financial decision. They come on and tell you that the world is coming to an end, and the only way to protect yourself is to buy gold or silver (depending on which one they are selling of course!)

Do you ever wonder where all the money comes from to pay for those commercials? By the time I tell you this story I will be willing to bet you can figure that out.

We can have a debate about the merits or non-merits of using precious metals in an investment portfolio. The long and short of that might come down to the simple fact that there are no good or bad investments, because just about everything you can invest in does well at times and poorly at others. But that’s not what I will be talking about today. My story deals with how you can play this game and start out with such a disadvantage you may never catch up.

A good friend and client of mine recently got a case of “gold fever.” Nothing I said could dissuade him from taking some of his hard-earned money and investing in gold. The salesman convinced him to spend his money on gold coins. The actual price tag of the coins was $33,778.  The total of the gold in those coins was approximately 15.25 ounces. He paid $2,215 per ounce.  The spot price of gold on the date was $1,391. Why did he pay over 59% more for gold than the spot market price on that day?

The answer in a nutshell is gold coins.

Normal markup for gold bullion is from 2 to 10%. If you’re around the 2 to 5% range, that wouldn’t be bad but he was at a 59%markup! What seems to get lost somewhere in the sales presentation is that when you purchase coins, you are not only buying the gold, you are paying for the numismatic value of the coins as well. Just what is numismatic value? In its simplest form it is the added value that a coin brings because of its value as a collectible or as a piece of art. So about half of that 59% was established based on how rare and how pretty the coin might be. The rest of the cost comes from the simple fact that the spread – the range between how much a dealer pays for a coin and how much it sells for – is from 17 to 33%. My friend spread on this particular order was a mere 24.94%.

So how much were those coins worth when valued approximately 2 months later? $20,630.20 — a loss of $13,148.55, or 39%!  What about the spot price of gold on the same day the coins were valued? $1,361 – down $30 from where it was when he purchased the coins – that’s about a 2% loss. The selling company provided the value for the coins when they were appraised. We have no idea what they would actually sell for in the open market. The value of gold bullion was very easy to find for the same dates on the Internet.

The moral of the story? If you decide you want to buy gold – or any precious metals – make sure you truly understand what you are buying and how much it will cost so you don’t start out so far down it would take a huge market rally just to get you back to what you paid!