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The Federal Reserve lowered its benchmark interest rate by a half-point, the largest cut since 2008, in a move to offset the impact of the coronavirus on the U.S. economy. To help explain it all, we're joined via telephone by Mohamed El-Erian, Chief Economic Adviser to Allianz.
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"Jill on Money" theme music is by Joel Goodman, www.joelgoodman.com.
I never take it for granted how fortunate I am to have my job. Let's be honest, it's not really a job when you're doing what you love. And that's what I get to do as a journalist covering personal finance and economics.
I never take it for granted how fortunate I am to have my job. Let’s be honest, it’s not really a job when you’re doing what you love. And that’s what I get to do as a journalist covering personal finance and economics.
With the “job” comes the opportunity to meet many smart, interesting and influential people, some of whom are legit heavyweights within their specific industries and in the world at large. Today’s Better Off guest, the esteemed Dr. Mohamed El-Erian, falls into that category. Of all of the economists and financial services executives that I have been privileged to interview, Mohamed is one of the few who can distill and communicate complicated ideas in a way that all of us can understand. That’s why we’re keeping him around for two episodes…there’s just too much knowledge in his brain to squeeze into one show.
While you may have seen or read Dr. El-Erian before—as a guest on CNBC, a LinkedIn Influencer, a columnist for “Bloomberg View,” a contributing editor to the “Financial Times,” and the chief economic advisor for Allianz—our conversations on “Better Off” are rare opportunities where he can delve into a myriad of big picture economic topics for more than the three minutes usually allotted to his appearances.
Mohamed’s bestselling book, “The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse,” will be released in paperback next month. I encourage everyone to read it, because it was one of my top picks for economics/business books last year.
In part two of the interview we talk to Mohamed about the financial concerns keeping him up at night. We also continue our discussion on Brexit and the ongoing crisis in Greece and why that country faces the risk of a lost generation.
But it’s not all doom and gloom. Before leaving us, Mohamed touched on the three reasons why he continues to remain optimistic about the global economy.
“Better Off” is sponsored by Betterment.
Have a finance related question? Email us here or call 855-411-JILL.
We love feedback so please subscribe and leave us a rating or review in iTunes!
Connect with me at these places for all my content:
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"Better Off" theme music is by Joel Goodman, www.joelgoodman.com.
I never take it for granted how fortunate I am to have my job. Let's be honest, it's not really a job when you're doing what you love. And that's what I get to do as a journalist covering personal finance and economics.
I never take it for granted how fortunate I am to have my job. Let’s be honest, it’s not really a job when you’re doing what you love. And that’s what I get to do as a journalist covering personal finance and economics.
With the “job” comes the opportunity to meet many smart, interesting and influential people, some of whom are legit heavyweights within their specific industries and in the world at large. Today’s Better Off guest, the esteemed Dr. Mohamed El-Erian, falls into that category. Of all of the economists and financial services executives that I have been privileged to interview, Mohamed is one of the few who can distill and communicate complicated ideas in a way that all of us can understand. That’s why we’re keeping him around for two episodes…there’s just too much knowledge in his brain to squeeze into one show.
While you may have seen or read Dr. El-Erian before—as a guest on CNBC, a LinkedIn Influencer, a columnist for “Bloomberg View,” a contributing editor to the “Financial Times,” and the chief economic advisor for Allianz—our conversations on “Better Off” are rare opportunities where he can delve into a myriad of big picture economic topics for more than the three minutes usually allotted to his appearances.
Mohamed’s bestselling book, “The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse,” will be released in paperback next month. I encourage everyone to read it, because it was one of my top picks for economics/business books last year.
In part one of the interview Mohamed touches on the three things he believes every investor needs to be a successful:
If you only possess one of these attributes—gut instinct—don’t worry! We also discuss passive investing as an alternative to stock picking.
As the new administration and Congress roll out various fiscal policies, it was a treat to hear what’s on Mohamed’s wish list. There are measures that the government can take to foster a more inclusive U.S. economy, help boost wage growth and improve the current tax system. And of course, we wouldn’t let him go before getting this UK-educated economist’s view of Brexit!
“Better Off” is sponsored by Betterment.
Have a finance related question? Email us here or call 855-411-JILL.
We love feedback so please subscribe and leave us a rating or review in iTunes!
Connect with me at these places for all my content:
https://twitter.com/jillonmoney
https://www.facebook.com/JillonMoney
https://www.instagram.com/jillonmoney/
https://www.linkedin.com/in/jillonmoney/
http://www.stitcher.com/podcast/jill-...
https://itunes.apple.com/us/podcast/b...
"Better Off" theme music is by Joel Goodman, www.joelgoodman.com.
The surprise announcement from PIMCO that outspoken star and CEO (and Co-Chief Investment Officer with PIMCO founder Bill Gross) Mohamed El-Erian was stepping down, created a flurry of activity for my inbox. Industry insiders opined on why he “got pushed out,” while ordinary investors wondered whether the departure of such an influential leader should prompt them to dump PIMCO funds. I will leave the former question to the rumor mill, but I am happy to address the latter one. The answer is that you should dump PIMCO funds, but not because El-Erian left: you should ditch PIMCO or any other actively managed fund because index funds are a cheaper and more efficient way to invest. Sure, there are some managed fund managers who sporadically beat the index, but the simple fact remains that it is very difficult to beat the index after factoring in costs and fees.
According to the Investment Company Institute, as of 2011, the average expense ratio for an actively managed equity fund averaged 0.93 percent, while index equity funds have average fees of 0.13 percent. It's certainly tough to beat the index when you start out the year in the hole by 0.8 percent! That's why most research has proven that over the past 40 years or so, only about a third of funds beat the index.
But even this number may be suspect - according to Vanguard founder John Bogle, the statistic ignores the fact that many underperforming funds close and as a result, some analysis treats these closed funds as if they never existed. Bogle provided Fortune Magazine with research that showed when accounting for closures, only 12 percent of funds beat the index!
I know I won't make believers out of everyone. If you still cling to the notion that the wizard behind the investment curtail holds the key to superior performance, it will take some work on your part. You need to identify active managers with a proven track record, who can consistently stick to an articulated and prudent strategy. You will also want to look for a fund that maintains low investment costs, administrative and advisory fees, plus costs due to portfolio turnover, commissions, and execution. For some, the performance payoff may be worth the time and energy necessary to find these hidden gems.
If you prefer to spend your time in other ways and want to make your investment life a little easier, there’s a simple solution: instead of trying to beat the index, just buy the index! Last year, index fund pioneer Vanguard issued a research report comparing index versus managed funds, and noted “persistence of performance among past [managed fund] winners is no more predictable than a flip of a coin…low-cost index funds have displayed a greater probability of outperforming higher-cost actively managed funds.”
Did you catch that -- a FLIP OF A COIN! For my time and money, I prefer to skip the star manager - even one as pedigreed as El-Erian - and stick to what works over the long term: a diversified portfolio of index funds.