Bill Miller's Legg-Mason Fund

The numbers are out. Over the past decade, Bill Miller, the once-esteemed fund manager of the Legg-Mason fund, has trailed the market by a several percent per year. Throughout the 1990s, Bill Miller became one of the darlings of the fund industry, constantly churning out returns that stomped the market at-large. Regarded as a financial genius, Bill Miller acquired almost $1 billion in his fund. Now, the pendulum has swung in the other direction as the stocks that Bill Miller has purchased have fallen out of favor.

Not only does this demonstrate just how quickly yesterday's stars can turn into today's burnouts, they also demonstrate the futility of trying to time and beat the market. If Bill Miller, a very intelligent man who had beaten the stock market for over a decade and a half, can lose his prowess and start underperforming the market, then what basis does the average investor have for thinking that he or she can achieve market superior returns? Of course, the right answer is that low-cost index funds, such as those found at Vanguard, are the safest way to bolster your retirement savings, as your general returns will be quite similar to the overall market, minus the frictional expenses. Robert Wasilewski over at RW Investing wrote a great article on Bill Miller's falling out of favor in the fund industry, and I highly recommend that you check out his article here: http://rwinvesting.blogspot.com/2011/07/legg-mason-10-year-results.html .

Low-Cost 401(k) Provider

One of the greatest indicators of investor returns in the stock market is the amount of money that each investor spends on account expenses. And this is mostly intuitive. If you pay 2.1% in annual expenses on your 401(k), then your mutual funds and other investments will have to beat a generic stock market index fund that only charges 0.1% by a full two percentage points. And this is difficult for most mutual funds to do. And yet, this is the selection facing most 401(k) investors as they try to decide which investments would be the best for their portfolio. Generally speaking, Vanguard has a reputation for running the most cost-efficient funds in town, often charging 0.1% for their index funds. This gives the investor a tremendous advantage, as his returns will essentially reflect those of the overall market at-large. So the moral of the story in 401(k) investing is this--look for the lowest cost options that your provider gives you, and if you want to pay up for a more expensive fund, make sure you have a reasonable expectation for believing that the fund will exceed the returns of the overall stock market. To check out a great article on this topic, be sure to check out Allan Roth's article at Money Watch, link here: http://moneywatch.bnet.com/investing/blog/irrational-investor/best-small-company-401k-provider/3693/