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Mutual Fund News

A core position in index funds

Special to The Globe and Mail

Kevin Brothaler, 27

Occupation: R&D engineer, software development

Portfolio: Core consists of Canadian and U.S. index funds, with rest spread over dividend-paying precious metals and energy stocks such as Paramount Energy Trust and Spartan Exploration Ltd.

The investor

"When I first started out, I placed my funds in balanced funds," says Kevin Brothaler. "As I did more research on investing, however, I learned that passively managed index funds actually provided better returns over the long run."

Andrew Hallam, a 40-year-old high school teacher and financial writer/blogger who became a millionaire through diligent saving and value investing, has been a big influence. (Mr. Hallam was profiled July 3 in Me and My Money).

Mr. Brothaler continues to educate himself on financial matters and shares what he has learned on a blog at investitwisely.com. Through reader feedback received on his posts, he hopes to further his own understanding and become a better investor.

His approach

"I am young and my investment horizon is long, so equity index funds are where I am investing most of my cash flow. I am hoping to capitalize on the greater upside potential of the markets over the longer run.

"Although I keep my core investment position in index funds," he adds, "I am also building up passive income on the side via dividend-paying stocks. I also invest in precious metals both for diversification and as an insurance policy.

"I love investing when the markets are down. I know that when the markets are down, I am getting a bargain on each unit that I buy."

"Conversely, I start to grow cautious when everyone and their best friend start buying into something. I believe that Warren Buffett said it best when he said to be 'fearful when others are greedy and greedy when others are fearful.'"

Best move

"My best investment move was the day I started my investment journey and opened up an investment account."

Worst move

"My worst investment move was waiting until my mid-twenties to start saving money. By starting earlier, I would have been able to take advantage of compounding growth over time."

Advice

"Start saving as early in your life as you can. Starting early gives compound growth the time it needs to really work its magic."

"I recommend a core portfolio of index funds. The evidence shows that low-cost index funds provide a better return, and this can make all the difference at retirement."

Want to share your strategies?

E-mail mccolumn@yahoo.com

© 2007 The Globe and Mail. All rights reserved.

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