Five Beginners’ Steps to a Greener Home

NYT

By JULIE SCELFO

Published: March 11, 2009

A RECENT Amazon.com search for “green home” pulled up more than 15,000 book titles. Who has time to read them all? So this week, The Green Home tracked down Eric Corey Freed, the author of “Green Building & Remodeling for Dummies,” and asked him to distill this growing cottage industry of green advice into five must-do steps.

What’s the first and most important thing every green-minded dweller should do?

Look at all the vampire loads that are sucking energy even when you’re not using them.

You mean like the toaster with a digital clock and the cellphone charger?

Yes. Anything with a ready light. Collectively, vampire loads cost Americans about $3 billion a year. The biggest culprits are stereos, DVRs, game systems and plasma TVs. Simply unplug them when they’re not in use. Or purchase smart power strips, which cost about $25 and shut off automatically.

What’s the second step for making our homes greener?

Take an empty two-liter soda bottle, wash it out, fill it with water, screw the lid on tightly and set it into your toilet tank, as far away from the flapper valve as possible. This prevents two liters of water from being used every time you flush.

Will it leave enough water for a proper flush?

A new low-flow toilet uses 1.6 gallons per flush. Older toilets go up to seven gallons a flush. Two liters is only half a gallon, so there’s still plenty of water left for most bathroom visits. Besides, you can always flush twice for those rare occasions when it’s truly needed.

Moving right along. Your third recommendation?

Install an ultra-low-flow shower head. A 1992 federal law requires all shower heads to be “low flow,” which means 2.5 gallons shoot out every minute it’s on. Switching to ultra-low-flow means you could go anywhere from two gallons all the way down to half a gallon a minute.

But how’s the water pressure?

Ultra-low-flow shower heads mix outside room air into the water so the pressure is surprisingly good. The technology has really advanced. The old stigma of not having enough pressure — do you remember the old “Seinfeld” episode where Kramer couldn’t get enough water, so he switched to an elephant hose? — that doesn’t really apply.

So far, these projects sound really manageable. What’s No. 4?

Install a gray-water system that collects soapy water and diverts it to the toilet. Instead of clean water, you flush with soapy water. WaterSaver Technologies (watersavertech.com) makes AQUS, a $300 system that installs under the sink.

Is there a simpler way to capture and use gray water?

Actually, there is. It’s a toilet-topped sink called SinkPositive (sinkpositive.com). You replace the toilet’s heavy porcelain lid with this sink basin, which has a built-in faucet. When you flush, fresh water comes out of the faucet and you wash your hands with it. The soapy water collects in the toilet tank for the next flush.

Forgive me for asking, but how does the SinkPositive look?

Like something you might find in a dentist’s office.

What’s the final step people should take?

This is probably the most important: replace old thermostats with a programmable one. It’s kind of like a TiVo of thermostats. It lets you turn the heat down when you sleep and back up before you wake. It can also tell the difference between Monday and Friday, so you can turn down the heat while you’re at work. A good one costs about $20, and saves about $180 a year on energy bills.

So we don’t need to go home and install solar panels or put down bamboo flooring tonight? That’s a relief.

These five projects aren’t sexy, but everybody can do them.

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The Index Funds Win Again - NYTimes.com

The Index Funds Win Again
By MARK HULBERT
THERE’S yet more evidence that it makes sense to invest in simple, plain-vanilla index funds, whose low fees often lead to better net returns than hedge funds and actively managed mutual funds with more impressive performance numbers.

Basic stock market index funds generally aspire to nothing more than matching the returns of a market benchmark. So in a miserable year for stocks, index funds may not look very appealing. But it turns out that, after fees and taxes, it is the extremely rare actively managed fund or hedge fund that does better than a simple index fund.

That, at least, is the finding of a new study by Mark Kritzman, president and chief executive of Windham Capital Management of Boston. He presented his results in the Feb. 1 issue of Economics & Portfolio Strategy, a newsletter for institutional investors published by Peter L. Bernstein Inc.

Mr. Kritzman, who also teaches a graduate course in financial engineering at M.I.T.’s Sloan School of Management, set up his study to accurately measure the long-term impact of all the expenses involved in investing in a mutual fund or hedge fund. Those include transaction costs, taxes and management and performance fees.

He is not the first to try such a measurement. But, he said in an e-mail message, it is surprisingly hard to measure these costs accurately. The bite taken out by taxes, for example, depends on the specific combination of positive years and losing ones, as well as the order in which they occur. That combination and order also affect the performance fees charged by hedge funds.

Mr. Kritzman devised an elaborate method to take such contingencies into account. Then he calculated the average return over a hypothetical 20-year period, net of all expenses, of three hypothetical investments: a stock index fund with an annualized return of 10 percent, an actively managed mutual fund with an annualized return of 13.5 percent and a hedge fund with an annualized return of 19 percent. The volatility of the three funds’ returns — along with their turnover rates, transaction fees and management and performance fees — was based on what he determined to be industry averages.

Mr. Kritzman found that, net of all expenses, including federal and state taxes for a New York State resident in the highest tax brackets, the winner was the index fund.

Specifically, he assumed that long-term capital gains were subject to a 15 percent federal tax and a 6.85 percent state tax; short-term capital gains and dividends were taxed at a combined federal and state rate of nearly 42 percent. The index fund’s average after-expense return was 8.5 percent a year, versus 8 percent for the actively managed fund and 7.7 percent for the hedge fund.

Expenses were the culprit. For both the actively managed fund and the hedge fund, those expenses more than ate up the large amounts — 3.5 and 9 percentage points a year, respectively — by which they beat the index fund before expenses.

IF such outperformance isn’t enough to overcome the drag of expenses, what would do the trick? Mr. Kritzman calculates that just to break even with the index fund, net of all expenses, the actively managed fund would have to outperform it by an average of 4.3 percentage points a year on a pre-expense basis. For the hedge fund, that margin would have to be 10 points a year.

The chances of finding such funds are next to zero, said Russell Wermers, a finance professor at the University of Maryland. Consider the 452 domestic equity mutual funds in the Morningstar database that existed for the 20 years through January of this year. Morningstar reports that just 13 of those funds beat the Standard & Poor’s 500-stock index by at least four percentage points a year, on average, over that period. That’s less than 3 out of every 100 funds.

But even that sobering statistic paints too rosy a picture, the professor said. That’s because it’s one thing to learn, after the fact, that a fund has done that well, and quite another to identify it in advance. Indeed, he said, he has found from his research that only a minority of funds that beat the market in a given year can outperform it the next year as well.

Professor Wermers said he believed that it was “exceedingly probable that any fund that has beaten the market by an average of more than one percentage point per year over the last decade achieved that return almost entirely due to luck alone.”

“By definition, therefore, such a fund could not have been identified in advance,” he added.

The investment implication is clear, according to Mr. Kritzman. “It is very hard, if not impossible,” he wrote in his study, “to justify active management for most individual, taxable investors, if their goal is to grow wealth.” And he said that those who still insist on an actively managed fund are almost certainly “deluding themselves.”

What if you’re investing in a tax-sheltered account, like a 401(k) or an I.R.A.? In that case, Mr. Kritzman conceded, the odds are relatively more favorable for active management, because, in his simulations, taxes accounted for about two-thirds of the expenses of the actively managed mutual fund and nearly half of the hedge fund’s. But he emphasized the word “relatively.”

“Even in a tax-sheltered account,” he said, “the odds of beating the index fund are still quite poor.”

Mark Hulbert is editor of The Hulbert Financial Digest, a service of MarketWatch. E-mail: strategy@nytimes.com.

Strategies - The Index Funds Win Again - NYTimes.com

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