Actively managed fund might not be best route

Q: Can you explain what an actively managed mutual fund is? — C.P., Jacksonville, Illinois

A: It’s a typical mutual fund, in that it’s managed by professionals who study and select various investments for the fund, aiming for solid returns.

Passively managed funds follow an index or a specified part of the market; each aims to mirror the performance of that index or market subset by holding the same securities in the same proportion. An index fund based on the S&P 500 will hold the 500 or so stocks in that index (or a representative subset). Index funds are passively managed because there isn’t much thinking or deciding for their managers to do.

Curiously, most actively managed stock funds underperform their benchmark indexes. That’s partly because of cost, as index funds are far less expensive to operate — and they tend to have much lower fees, too. Most of us would do well to have at least some, if not most, of our longterm money in index funds.

Fool’s school: Scary retirement stats

Most Americans retire in their early 60s. How many years from retiring are you, and have you saved enough money for retirement? Here are some statistics that might help you plan or spur you to action:

According to the 2019 Retirement Confidence Survey, 43% of retirees retired earlier than expected, most often because of a job loss or health issue. It’s smart to hope for the best but prepare for the worst.

The survey found that 49% of Americans reported having less than $50,000 in savings and investments, excluding the value of their homes. Take some time to figure out how much you need. For many people, even $1 million won’t be enough.

Also, 36% of retirees found that health care or dental expenses in retirement were somewhat higher (24%) or much higher (12%) than expected.

Fidelity Investments says a 65-year-old couple retiring today can expect to spend an average of $285,000 out of pocket on health care over the course of their retirement, not including expenses such as over-the-counter medications, some dental services or long-term care.

AARP estimates that 52% of those turning 65 will need long-term care in their lifetime. So look into long-term care insurance, which costs more the older you are when you buy it.

The Social Security Administration says that 1 in 3 65-year-olds today will live past age 90, and about 1 in 7 will live past 95. If you live an extra-long life, your nest egg will have to support you for an extra-long time. Retiring at 65 and living to 95 means 30 years of retirement!

Name that company

I trace my roots back to April Fool’s Day in 1976, when I was founded in a garage by a couple of college dropouts. In 1984, I released the first mass-market computer with a mouse. One of my founders bought Pixar in 1986. Today, based in California, I employ more than 100,000 people, and my retail workers are extremely smart. I sell nearly as many watches as the entire Swiss watch industry. I dropped the word “computer” from my name in 2007. If my name were more specific, it might be Northern Spy, Sheepsnose, Pippin or Arkansas Black. Who am I?

Last week’s trivia answer

I’m the result of an 1898 merger of 20 paper mills in the northeastern U.S. Today, based in Memphis, Tennessee, I’m a leading manufacturer of renewable, fiber-based packaging, pulp and paper products, employing more than 52,000 people and serving more than 25,000 customers in 150 countries. My offerings range from pulp for diapers and tissues to corrugated cardboard, photocopy paper and gypsum-facing liners for drywall. I have been the largest private landowner in the United States, and I am one of the top users of recovered fiber in the U.S. I rake in more than $23 billion annually. Who am I? (Answer: International Paper)

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