http://wyliemoney.blogspot.com/2007/05/mostly-managed-vs-lazy-vanguard-index.html

It’s true that index funds beat about 80% of actively managed funds because most funds are dogs.

Of the remaining 20% perhaps half beat their benchmark by luck.

The Kiplinger article attempts to identify the best of the remaining 10% of funds, those that add alpha.

One example of a fund in that article that consistently thrashes its benchmark is the Loomis Sayles Bond fund, LSBRX (LSBDX is a better version with lower expenses but a high minimum).
So if one wants bond exposure, why buy a bond index fund if one can own LSBRX?

True, many of us don’t know about LSBRX and might buy a crappy managed fund that’s worse than the index fund.

So the point of the article is to identify the really good stuff. And IMO many of the funds in the article are better than index funds. It doesn’t really matter how many crapola funds are out there if the few good ones can be identified. That said, one can’t go too wrong with index investing.

What bugs me is that the advice is on the next “in” stocks, as if their audience is day traders, but no day traders in their right minds would subscribe to a popular monthly magazine. (Maybe an exclusive monthly magazine!)

The problem is that advice like buy index funds and spend less money is not very good for selling magazines.

I like reading your reviews (totally painless!), but that’s about it.

You’re right in saying better information is available either on the internet or in a handful of classics, including Security Analysis as mentioned by Rob above (although he might have been referring to The Intelligent Investor, Security Analysis is where it’s really at for the serious investor.) or books such as Your Money or Your Life (which I have not read).

If you want up to date information on investing, a magazine is too slow. In depth business analysis or political/economic analysis is useful (ie BusinessWeek/The Economist/etc), but personal finance magazines are usually just a waste.

I’ve even renewed my Wall Street Journal sub. for as little as $50/year using ebay.

If your a reader from Canada than I highly recommend Canadian Money Saver cheap and 100% Ad free

As an aside

If you are really serious about understanding the stock market than you need to take the time to read Benjamin Grahams classic. To be fair it’s not easy reading (get the commentary edition). I keep it in the bathroom and skim it as I’m doing my business. I may or may not read the whole book (up to chapter 7) but already I have learned a ton of stuff. Most important lesson of the book don’t get caught up in stock market mania. Quite appropriate as the DOW hits record highs daily.

A tibbit I picked up. Yes the stock market has return X% over the last 100 years but most peoples time horizon is 20-25 years (40 to retirement) and over the last 100 years there has been 4 20 year time periods when the stock market went sideways. As well for the DOW to do what it did in the last 20 it would have to rise to 140,000. Quite unlikely I think. Hence the reason why I’m not interested in Capital Gains. My focus is on dividends How else can you earn 25-30% (per year)on your investment. To me a stock market crash would be a bonus, I can get my stocks on sale.

note: as the dividend increases the dividend yield increases, my Dad has some stocks that he bought many years ago for under $10 with a dividend of 2-3 dollars or a yield of 20+ percent.

Then again while a few small time investors in those mutual funds may be in an average income bracket, the really big investors in those mutal funds, the ones the advertisers want, are not. So they pitch to their advertisers audience, which at the end of the day is not surprising.

That said, I think that personal finance magazines have a variety of intended audiences. You may not be the main one — but you may be able to benefit from some of the ideas nonetheless. For example, you might not need to understand how to avoid AMT now, but some of the ideas in an article about it would be beneficial.

It may not be “personal finance” — but there is some great info in the Financial Times, the Wall Street Journal, and even the Washington Post or New York Times. Expanding the universe of publications can open you up to other opinions, topics, and ideas.

I don’t like most of the info these magazines give. Seems like all they do is recycle stories and are biased towards certain funds or companies that spend alot of money in advertising.

Your mileage may vary.