Index funds beat actively managed funds

When it comes to mutual fund investing, I'm a believer of index funds. During the recent volatile market environment,  actively-managed mutual funds on average produced more losses than the losses of passively-managed index funds.

Average losses for stock-index funds last year were 39.1%, while actively managed funds lost 40.5% on average, according to investment researcher Morningstar Inc.

According to research, when there is a great uncertainty in the market, investors tend to switch their investments from actively-managed funds to index funds.

Actively managed stock funds saw net outflows of $221.8 billion in 2008, while index funds saw net inflows of $17.6 billion, according to data from fund-tracker Lipper Inc.

Index funds' share of the marketplace rose 1.4 percentage points in 2008 to 13.2% from 11.8% a year earlier. Total assets in index funds at year's end were $490 billion; actively managed stock funds held $3.2 trillion, according to Lipper.

I strongly recommend index funds for long-term investments. Low management fee and simple investment strategy of the funds are perfect an average investor.

Source: Actively managed funds lose share to index rivals, MarketWatch.com

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Living in California will get expensive

The State of California is having financial trouble, big time. This week a bill passed to fight the budget deficit. How will the new bill affect those of us who live in California?

Personal income tax rates will rise by one-quarter of a percent, and the state sales tax will climb by 1 percentage point, to 6 percent, though each county will have different rates and the average will be 8.9 percent. The state’s vehicle license fee — which Mr. Schwarzenegger abolished with great theatrics when he took office in 2003 — will nearly double, to 1.15 percent of the value of the vehicle.

I really hate paying more taxes. But, I guess we really have no way out of the budget deficit if we don't raise taxes. I hope the government will consider cutting taxes when the budget runs positive again.

Source:

• California Passes Budget After Scathing Battle, NYT
  

Can Palm Pre compete with Apple iPhone

Apple iPhone is certainly dominating the smartphone market in the US and many other 3G countries. So far, it has no major competitor. Palm Pre, recently unveiled at CES, looks relative promising, and somewhat controversial.

First, it features a multi-touch user interface that maybe infringing Apple's patents. Second, its has a new operating system called webOS, which is built on the Linux operating system and encourages developers to write native applications using standard web technology -- HTML, CSS and JavaScript. Third, it will support Adobe Flash, which iPhone will not support in the near future.

I think the business strategy behind Palm Pre is a lot like which of Google's Android -- use open source and standard web technology as an leverage to compete with Apple's relatively closed iPhone system. I think it's still too early to predicate who will come out at the top, but I very much welcome the competition.

Resource:

• VentureBeat article on Palm Pre webOS
• An overview of Palm Pre webOS architecture
  

The Internet Kills Your Cable TV

In economic downturn, full with uncertainty, cable TV subscriptions (~$40-100 per month) seems to be a luxury for many people. The latest consumer trend is watching TV shows and movies online without paying for any cable and satellite TV subscriptions.

From CNN.com,

As more Americans get used to watching video on their computers, more
Web sites are popping up to offer free movies and TV shows. Consumers
are taking advantage of this to eliminate cable or satellite TV and integrate their home entertainment with the Web. And online video viewership is skyrocketing.

Internet users in the United States watched a record 14.3 billion
online videos in December, an increase of 13 percent over the previous
month, according to comScore, an Internet marketing research firm.
Popular site YouTube led the growth charge, accounting for almost half the incremental gain in videos viewed.

Internet TV services such as Hulu, Joost and Veoh also are feeding off a new generation of tech-savvy users in search of cheap access to video content. Add to the mix players such as Netflix -- whose Roku set-top box offers more than 12,000 streaming videos and who is teaming with LG Electronics to embed new TVs with the service -- and there's enough online TV options to justify a subscription-free lifestyle.

My family enjoys watching TV and movies online. Since we had unsubscribed from our satellite TV service, our entertainment experience became rather personal. When we had the service, we were offered hundreds of programming channels, but we only frequented a few on a daily basis. Today, with Hulu, ABC.com and Netflix, we can create our programming schedule. Watch shows when we want and wherever we want.

I highly recommend everyone to experiment life without cable and satellite service. But, be warned, a high-speed internet connection is required!