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jose.bailen@gmail.com
Guest
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 Posted: Tue Mar 27, 2007 9:43 pm Post subject: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Market's |
 |
|
Again, if you forget for one minute the self-publicity side of this
article from Motley Fool these 7 recommendations look pretty
sensible. To those who focus mostly on short term results, point 4/
is pretty useful:
1. Invest in the Manager, Not the Fund- When you buy a mutual fund,
you're hiring a stock-picker. A fund can only be as strong as its
stock-picker-in-chief. Make sure your fund manager has a track record
of success spanning at least five years in both up and down markets.
Don't depend on the fund's prospectus and web site to give you the
full story on fund manager changes.
2. Find Funds with Low Fees - The rule of "you get what you pay for"
doesn't apply to mutual funds. In fact, it's often in reverse. On the
other hand, don't just blindly jump into index funds or exchange-
traded funds (ETFs) to save money. The actively managed funds I
recommend are beating the market. So paying a fraction of one percent
in fees to earn nearly double the market's return is a bargain.
3. Never Pay Loads or Sales Commissions - It's unnecessary to "pay"
for the privilege of owning any fund. In all my years of investing in
and writing about funds, I've never found a load fund so strong that I
couldn't equal or beat it with a no-load alternative. The very best
funds, in my opinion, for both returns and low costs, are no-load
funds.
4. Don't Chase Performance - Chasing last year's hot fund is a losing
game. Instead, pick funds with the same rigor you'd use to pick
individual stocks. Become a long-term owner of great funds with great
managers.
5. Choose Managers with Superior Strategies - I like managers who
build their portfolios based on analyzing company fundamentals, not
reading tea leaves. A game plan based on owning great companies bought
at good prices will win long-term. I'm a big fan of managers who have
been around long enough to see how their strategies work in various
market cycles. Managers who know the cycles can spot huge buying
opportunities in "apparent adversity."
6. Choose Shareholder-Friendly Funds - I select funds with a record
of putting their shareholders first. I look for honest and open
shareholder letters, falling expense ratios, and fund managers who
close funds to new investors when they become too big.
7. Find Managers Who Eat Their Own Cooking - Why should you invest
with a fund manager who isn't also putting his money on the line next
to yours? You'd be amazed if you knew how many fund managers don't
have a dime invested in the funds they run. We make a point to look
for funds where the managers have a big chunk of their own money
riding along with yours. It's the best way to know that they take your
best interests to heart. |
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Andrew Koenig
Guest
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| Posted: Tue Mar 27, 2007 10:08 pm Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
|
|
<jose.bailen@gmail.com> wrote in message
news:1175013820.051729.117310@n76g2000hsh.googlegroups.com...
| Quote: |
Again, if you forget for one minute the self-publicity side of this
article from Motley Fool these 7 recommendations look pretty
sensible.
|
Indeed -- though some of us might reach a slightly different conclusion than
others from these recommendations:
| Quote: |
1. Invest in the Manager, Not the Fund- When you buy a mutual fund,
you're hiring a stock-picker. A fund can only be as strong as its
stock-picker-in-chief.
|
This may be an argument in favor of index funds. Because when you buy an
index fund, you know it's not going to underperform its market segment.
| Quote: |
2. Find Funds with Low Fees
|
Another argument in favor of index funds.
| Quote: |
3. Never Pay Loads or Sales Commissions
|
Yet another argument in favor of index funds.
| Quote: |
4. Don't Chase Performance - Chasing last year's hot fund is a losing
game.
|
Yet another argument in favor of index funds, because they never
underperform their market.
| Quote: |
5. Choose Managers with Superior Strategies - I like managers who
build their portfolios based on analyzing company fundamentals, not
reading tea leaves. A game plan based on owning great companies bought
at good prices will win long-term.
|
This might possibly be an argument in favor of quant funds. The thing is,
if you know whether a manager has a superior strategy, then in principle so
does everyone else. And not everyone can beat the market; so what makes you
so special? The reason I say it might be an argument in favor of quant
funds is that the quants seem sometimes to be able to get a tiny edge by
disregarding companies that don't represent their market, even though an
index would include them. But I'm still not completely convinced.
| Quote: |
6. Choose Shareholder-Friendly Funds - I select funds with a record
of putting their shareholders first.
|
This would seem to argue in favor of Vanguard, whose only shareholders are
their funds' shareholders.
| Quote: |
7. Find Managers Who Eat Their Own Cooking
|
If you invest in index funds, this is irrelevant.
So I gotta say, I think this article is telling me I should be investing in
Vanguard index funds, after which my main problem is deciding on an asset
allocation. |
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Ed
Guest
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| Posted: Tue Mar 27, 2007 11:09 pm Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
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|
"Andrew Koenig" <ark@acm.org> wrote
| Quote: |
1. Invest in the Manager, Not the Fund- When you buy a mutual fund,
you're hiring a stock-picker. A fund can only be as strong as its
stock-picker-in-chief.
This may be an argument in favor of index funds. Because when you buy an
index fund, you know it's not going to underperform its market segment.
|
So what? It's also possible to outperform the index with a good managed
fund, it's not possible with an index fund.
| Quote: |
2. Find Funds with Low Fees
Another argument in favor of index funds.
3. Never Pay Loads or Sales Commissions
Yet another argument in favor of index funds.
|
Plenty of no-load funds out there.
| Quote: |
4. Don't Chase Performance - Chasing last year's hot fund is a losing
game.
Yet another argument in favor of index funds, because they never
underperform their market.
|
Just ask anyone who bought the Nasdaq100 in 2000.
| Quote: |
6. Choose Shareholder-Friendly Funds - I select funds with a record
of putting their shareholders first.
This would seem to argue in favor of Vanguard, whose only shareholders are
their funds' shareholders.
|
That's BS.
| Quote: |
7. Find Managers Who Eat Their Own Cooking
If you invest in index funds, this is irrelevant.
|
It's also irrelevant if you use managed funds.
| Quote: |
So I gotta say, I think this article is telling me I should be investing
in Vanguard index funds, after which my main problem is deciding on an
asset allocation.
|
We didn't get the same message from it. |
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David
Guest
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| Posted: Tue Mar 27, 2007 11:57 pm Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
|
|
On Mar 27, 5:43 pm, "jose.bai...@gmail.com" <jose.bai...@gmail.com>
wrote:
| Quote: |
Again, if you forget for one minute the self-publicity side of this
article from Motley Fool these 7 recommendations look pretty
sensible. To those who focus mostly on short term results, point 4/
is pretty useful:
1. Invest in the Manager, Not the Fund- When you buy a mutual fund,
you're hiring a stock-picker. A fund can only be as strong as its
stock-picker-in-chief. Make sure your fund manager has a track record
of success spanning at least five years in both up and down markets.
Don't depend on the fund's prospectus and web site to give you the
full story on fund manager changes.
According to Malkiel and others there is no such thing as stock- |
picking ability. Managers that do well in one period do not show any
greater ability in later periods than average, showing that results
are largely due to chance. The average managed fund lags the market by
about 2% p.a. due to fees and costs due to high turnover (Bogle) and
over the long term they are all average. Only low cost index funds
buying the total market (not Nasdaq) can roughly equal the market and
beat 80% of managed funds.
| Quote: |
2. Find Funds with Low Fees - The rule of "you get what you pay for"
doesn't apply to mutual funds. In fact, it's often in reverse. On the
other hand, don't just blindly jump into index funds or exchange-
traded funds (ETFs) to save money. The actively managed funds I
recommend are beating the market. So paying a fraction of one percent
in fees to earn nearly double the market's return is a bargain.
The actively managed funds that beat the market last year have no more |
chance of doing so next year than any others. The Motley Fool has no
idea which funds will do well next year. Low costs are very important
but so are index funds.
| Quote: |
3. Never Pay Loads or Sales Commissions - It's unnecessary to "pay"
for the privilege of owning any fund. In all my years of investing in
and writing about funds, I've never found a load fund so strong that I
couldn't equal or beat it with a no-load alternative. The very best
funds, in my opinion, for both returns and low costs, are no-load
funds.
The only no-load funds you can buy in the UK that I know of are index |
funds or Fidelity's moneybuilder series.
| Quote: |
4. Don't Chase Performance - Chasing last year's hot fund is a losing
game. Instead, pick funds with the same rigor you'd use to pick
individual stocks. Become a long-term owner of great funds with great
managers.
|
Don't chase hot funds-agreed, but there is no way of rigorously
selecting next year's fund winners, or stocks come to that. There are
no known future great funds or managers or companies, just past ones.
No one knows the future except in general terms.
| Quote: |
5. Choose Managers with Superior Strategies - I like managers who
build their portfolios based on analyzing company fundamentals, not
reading tea leaves. A game plan based on owning great companies bought
at good prices will win long-term. I'm a big fan of managers who have
been around long enough to see how their strategies work in various
market cycles. Managers who know the cycles can spot huge buying
opportunities in "apparent adversity."
There are no superior strategies. Company fundamentals are as good as |
tea leaves as neither work. The MF has been reading too many fund
adverts. These managers who spot huge buying opportunities are either
lucky or just myths dreamed up by advertising agencies.
| Quote: |
6. Choose Shareholder-Friendly Funds - I select funds with a record
of putting their shareholders first. I look for honest and open
shareholder letters, falling expense ratios, and fund managers who
close funds to new investors when they become too big.
Low fees and no loads covers most of it. |
| Quote: |
7. Find Managers Who Eat Their Own Cooking - Why should you invest
with a fund manager who isn't also putting his money on the line next
to yours? You'd be amazed if you knew how many fund managers don't
have a dime invested in the funds they run. We make a point to look
for funds where the managers have a big chunk of their own money
riding along with yours. It's the best way to know that they take your
best interests to heart.
|
How do you know what the managers invest in? I am fairly sure the UK
data protection act would judge this was private information no one
has a right to know. |
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jose.bailen@gmail.com
Guest
|
| Posted: Wed Mar 28, 2007 12:42 am Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
|
|
On Mar 27, 8:57 pm, "David" <d...@wilkinson6337.freeserve.co.uk>
wrote:
| Quote: |
On Mar 27, 5:43 pm, "jose.bai...@gmail.com" <jose.bai...@gmail.com
1. Invest in the Manager, Not the Fund- When you buy a mutual fund,
you're hiring a stock-picker. A fund can only be as strong as its
stock-picker-in-chief. Make sure your fund manager has a track record
of success spanning at least five years in both up and down markets.
Don't depend on the fund's prospectus and web site to give you the
full story on fund manager changes.
According to Malkiel and others there is no such thing as stock-
picking ability. Managers that do well in one period do not show any
greater ability in later periods than average, showing that results
are largely due to chance. The average managed fund lags the market by
about 2% p.a. due to fees and costs due to high turnover (Bogle) and
over the long term they are all average. Only low cost index funds
buying the total market (not Nasdaq) can roughly equal the market and
beat 80% of managed funds.
|
If you believe in the most strict version of the Efficient Market
Hypothesis -and that the EMH holds all the time, even in the very
short term- then the price of a stock reflects all available
information and nobody can beat the market on a consistent way (you
may do it, but just by chance). Under the EMH, you can only get
higher returns if you are willing to accept higher risk. Since
actively managed funds charge higher fees, for the same average before-
fee long term performance, it doesn't make sense to buy actively
managed funds. See this interesting interview with Gene Fama about
this topic:
http://www.dfaus.com/library/reprints/interview_fama_tanous/
| Quote: |
2. Find Funds with Low Fees - The rule of "you get what you pay for"
doesn't apply to mutual funds. In fact, it's often in reverse. On the
other hand, don't just blindly jump into index funds or exchange-
traded funds (ETFs) to save money. The actively managed funds I
recommend are beating the market. So paying a fraction of one percent
in fees to earn nearly double the market's return is a bargain.
The actively managed funds that beat the market last year have no more
chance of doing so next year than any others. The Motley Fool has no
idea which funds will do well next year. Low costs are very important
but so are index funds.
|
It depends on how they define "beating the market". If it means
superior long term returns to the market average, you may get these IF
you are willing to invest in riskier stocks (value stocks, for
example). That's how Warren Buffett got higher long-term returns:
because he accepted higher short-term volatility of these returns.
| Quote: |
4. Don't Chase Performance - Chasing last year's hot fund is a losing
game. Instead, pick funds with the same rigor you'd use to pick
individual stocks. Become a long-term owner of great funds with great
managers.
Don't chase hot funds-agreed, but there is no way of rigorously
selecting next year's fund winners, or stocks come to that. There are
no known future great funds or managers or companies, just past ones.
No one knows the future except in general terms.
|
On average, if you choose a diversified portfolio of small cap value
stocks, you will get a higher long term return, because these stocks
are more volatile in the short term. That's completely logical, it
applies to other assets like bonds and stocks (in general), or between
money market accounts and bonds, or U.S. government bonds and
corporate bonds: the higher the risk, the higher the equilibrium long
term return of an asset.
| Quote: |
5. Choose Managers with Superior Strategies - I like managers who
build their portfolios based on analyzing company fundamentals, not
reading tea leaves. A game plan based on owning great companies bought
at good prices will win long-term. I'm a big fan of managers who have
been around long enough to see how their strategies work in various
market cycles. Managers who know the cycles can spot huge buying
opportunities in "apparent adversity."
There are no superior strategies. Company fundamentals are as good as
tea leaves as neither work. The MF has been reading too many fund
adverts. These managers who spot huge buying opportunities are either
lucky or just myths dreamed up by advertising agencies.
|
Well, you may have stupid managers (same as you may have stupid
doctors, or stupid lawyers). So you may have managers which
underperform the market systematically given the risk of the portfolio
they are managing (they choose systematically stocks with low risk-
adjusted returns). |
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Ed
Guest
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| Posted: Wed Mar 28, 2007 12:49 am Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
|
|
"David" <david@wilkinson6337.freeserve.co.uk> wrote
| Quote: |
According to Malkiel and others there is no such thing as stock-
picking ability. Managers that do well in one period do not show any
greater ability in later periods than average, showing that results
are largely due to chance. The average managed fund lags the market by
about 2% p.a. due to fees and costs due to high turnover (Bogle) and
over the long term they are all average. Only low cost index funds
buying the total market (not Nasdaq) can roughly equal the market and
beat 80% of managed funds.
|
But they don't.
| Quote: |
The actively managed funds that beat the market last year have no more
chance of doing so next year than any others. The Motley Fool has no
idea which funds will do well next year. Low costs are very important
but so are index funds.
|
How about over time. There are many funds that beat their benchmark over
long periods of time.
| Quote: |
Don't chase hot funds-agreed, but there is no way of rigorously
selecting next year's fund winners, or stocks come to that. There are
no known future great funds or managers or companies, just past ones.
No one knows the future except in general terms.
|
Agreed.
| Quote: |
6. Choose Shareholder-Friendly Funds - I select funds with a record
of putting their shareholders first. I look for honest and open
shareholder letters, falling expense ratios, and fund managers who
close funds to new investors when they become too big.
Low fees and no loads covers most of it.
7. Find Managers Who Eat Their Own Cooking - Why should you invest
with a fund manager who isn't also putting his money on the line next
to yours? You'd be amazed if you knew how many fund managers don't
have a dime invested in the funds they run. We make a point to look
for funds where the managers have a big chunk of their own money
riding along with yours. It's the best way to know that they take your
best interests to heart.
How do you know what the managers invest in? I am fairly sure the UK
data protection act would judge this was private information no one
has a right to know.
|
It's usually in the SAI. The problem is that they rarely tell you how much
the manager has invested.
Morningstar ranks funds for risk adjusted return. Five stars possible. 5
stars = top 20% in category, 4 = next 20% etc.
All Vanguard, all index:
500 Fund 3
Balanced 4
Emerging Markets 3
European Stock 3
Extended Market 3
Growth 3
Large Cap 4
Mid Cap 4
Small Cap 3
Small Cap Value 3
Total Stock Market 4
Total Int'l Stock 4
Value 4
I would give you the 5 year rank for these index funds but whenever I do
that people always say that you have to give the 150 years or more so I'll
pass.
If you really want to know:
http://biz.yahoo.com/p/fam/vanguard.html
Click on profile and then performance. |
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Ed
Guest
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| Posted: Wed Mar 28, 2007 12:52 am Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
|
|
<jose.bailen@gmail.com> wrote
| Quote: |
If you believe in the most strict version of the Efficient Market
Hypothesis -and that the EMH holds all the time, even in the very
short term- then the price of a stock reflects all available
information and nobody can beat the market on a consistent way (you
may do it, but just by chance). Under the EMH, you can only get
higher returns if you are willing to accept higher risk. Since
actively managed funds charge higher fees, for the same average before-
fee long term performance, it doesn't make sense to buy actively
managed funds. See this interesting interview with Gene Fama about
this topic:
http://www.dfaus.com/library/reprints/interview_fama_tanous/
|
Interesting but DFA only offers one index fund out of their large family of
funds. |
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jose.bailen@gmail.com
Guest
|
| Posted: Wed Mar 28, 2007 3:38 am Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
|
|
On Mar 27, 9:52 pm, "Ed" <fri...@fishinthe.net> wrote:
| Quote: |
http://www.dfaus.com/library/reprints/interview_fama_tanous/
Interesting but DFA only offers one index fund out of their large family of
funds.
|
An index fund is an style of passive investment which constraints the
fund. Because of the way they are defined, if the index changes
(adding/dropping stocks, changing weights), then the fund has to
change the composition of its stock holdings in the same way.
Dimensional does not offer index funds because of these constraints,
that reduce their bargaining power when buying stocks. So, while they
do not engage in researching particular stocks (they believe that
markets are efficient all the time, so this is costly and useless
exercise) what they do is to pick a variety of stocks of the asset
class. For instance, among 1,031 small cap value stocks that they had
in their database as of end-November 2006, they can pick those which,
at a given time, are cheaper to transact than the rest, and buy
whatever shared they want of these stocks.
That's DFA philosophy (from their website):
1/ Markets Work
Markets throughout the world have a history of rewarding investors for
the capital they supply. Companies compete with each other for
investment capital, and millions of investors compete with each other
to find the most attractive returns. This competition quickly drives
prices to fair value, ensuring that no investor can expect greater
returns without bearing greater risk.
The futility of speculation is good news for the investor. It means
that prices for public securities are fair and that persistent
differences in average portfolio returns are explained by differences
in average risk.
It is certainly possible to outperform markets, but not without
accepting increased risk.
2/ Take risks worth taking
Evidence from practicing investors and academics alike points to an
undeniable conclusion: Returns come from risk. Gain is rarely
accomplished without taking a chance, but not all risks carry a
reliable reward. Financial science over the last fifty years has
brought us to a powerful understanding of the risks that are worth
taking and the risks that are not.
Three Equity Factors
Market Stocks have higher expected returns than fixed income.
Size Small company stocks have higher expected returns than large
company stocks.
Price Lower-priced "value" stocks have higher expected returns than
higher-priced "growth" stocks.
Everything we have learned about expected returns in the equity
markets can be summarized in three dimensions. The first is that
stocks are riskier than bonds and have greater expected returns.
Relative performance among stocks is largely driven by the two other
dimensions: small/large and value/growth. Many economists believe
small cap and value stocks outperform because the market rationally
discounts their prices to reflect underlying risk. The lower prices
give investors greater upside as compensation for bearing this risk.
3/ Diversification
Successful investing means not only capturing risks that generate
expected return but reducing risks that do not. Avoidable risks
include holding too few securities, betting on countries or
industries, following market predictions, and speculating on
"information" from rating services. To all these, diversification is
the antidote. It washes away the random fortunes of individual stocks
and positions your portfolio to capture the returns of broad economic
forces.
4/ Structure
Capital markets are composed of many classes of securities, including
stocks and bonds, both domestic and international. A group of
securities with shared economic traits is commonly referred to as an
asset class. There are several asset classes, all with average price
movements that are distinct from one another. Investors can benefit by
combining the different asset classes in a structured portfolio.
A full range of asset classes includes small and large stocks,
domestic and international, value and growth, emerging market
countries, global bonds, real estate, and even municipal bonds.
Because the asset classes play different roles in a portfolio, the
whole is often greater than the sum of its parts. Investors have the
ability to achieve greater expected returns with less price
fluctuation and more consistency than they would in a less
comprehensive approach.
However, because no two investors are alike, there is no single
"optimal" asset allocation. Each investor has his or her own risk
tolerances, goals, and life circumstances that dictate the weightings
of core and asset class portfolios. You should consult your financial
advisor or plan administrator to help you determine an appropriate
mix. In general, the greater the proportion of stocks a portfolio
holds, especially small cap and value stocks, the more "aggressive" is
its risk and the greater is its expected return. |
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Jerry
Guest
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| Posted: Wed Mar 28, 2007 3:47 am Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
|
|
I mainly like actively managed funds. IMO, a decent manager can do better
than just an average. Fidelity has a number of no load funds with pretty
low fees that historically outperform the S&P. A few I like are FSLSX,
FVDFX, and FEQIX.
Jerry
<jose.bailen@gmail.com> wrote in message
news:1175024572.361600.241880@e65g2000hsc.googlegroups.com...
| Quote: |
On Mar 27, 8:57 pm, "David" <d...@wilkinson6337.freeserve.co.uk
wrote:
On Mar 27, 5:43 pm, "jose.bai...@gmail.com" <jose.bai...@gmail.com
1. Invest in the Manager, Not the Fund- When you buy a mutual fund,
you're hiring a stock-picker. A fund can only be as strong as its
stock-picker-in-chief. Make sure your fund manager has a track record
of success spanning at least five years in both up and down markets.
Don't depend on the fund's prospectus and web site to give you the
full story on fund manager changes.
According to Malkiel and others there is no such thing as stock-
picking ability. Managers that do well in one period do not show any
greater ability in later periods than average, showing that results
are largely due to chance. The average managed fund lags the market by
about 2% p.a. due to fees and costs due to high turnover (Bogle) and
over the long term they are all average. Only low cost index funds
buying the total market (not Nasdaq) can roughly equal the market and
beat 80% of managed funds.
If you believe in the most strict version of the Efficient Market
Hypothesis -and that the EMH holds all the time, even in the very
short term- then the price of a stock reflects all available
information and nobody can beat the market on a consistent way (you
may do it, but just by chance). Under the EMH, you can only get
higher returns if you are willing to accept higher risk. Since
actively managed funds charge higher fees, for the same average before-
fee long term performance, it doesn't make sense to buy actively
managed funds. See this interesting interview with Gene Fama about
this topic:
http://www.dfaus.com/library/reprints/interview_fama_tanous/
2. Find Funds with Low Fees - The rule of "you get what you pay for"
doesn't apply to mutual funds. In fact, it's often in reverse. On the
other hand, don't just blindly jump into index funds or exchange-
traded funds (ETFs) to save money. The actively managed funds I
recommend are beating the market. So paying a fraction of one percent
in fees to earn nearly double the market's return is a bargain.
The actively managed funds that beat the market last year have no more
chance of doing so next year than any others. The Motley Fool has no
idea which funds will do well next year. Low costs are very important
but so are index funds.
It depends on how they define "beating the market". If it means
superior long term returns to the market average, you may get these IF
you are willing to invest in riskier stocks (value stocks, for
example). That's how Warren Buffett got higher long-term returns:
because he accepted higher short-term volatility of these returns.
4. Don't Chase Performance - Chasing last year's hot fund is a losing
game. Instead, pick funds with the same rigor you'd use to pick
individual stocks. Become a long-term owner of great funds with great
managers.
Don't chase hot funds-agreed, but there is no way of rigorously
selecting next year's fund winners, or stocks come to that. There are
no known future great funds or managers or companies, just past ones.
No one knows the future except in general terms.
On average, if you choose a diversified portfolio of small cap value
stocks, you will get a higher long term return, because these stocks
are more volatile in the short term. That's completely logical, it
applies to other assets like bonds and stocks (in general), or between
money market accounts and bonds, or U.S. government bonds and
corporate bonds: the higher the risk, the higher the equilibrium long
term return of an asset.
5. Choose Managers with Superior Strategies - I like managers who
build their portfolios based on analyzing company fundamentals, not
reading tea leaves. A game plan based on owning great companies bought
at good prices will win long-term. I'm a big fan of managers who have
been around long enough to see how their strategies work in various
market cycles. Managers who know the cycles can spot huge buying
opportunities in "apparent adversity."
There are no superior strategies. Company fundamentals are as good as
tea leaves as neither work. The MF has been reading too many fund
adverts. These managers who spot huge buying opportunities are either
lucky or just myths dreamed up by advertising agencies.
Well, you may have stupid managers (same as you may have stupid
doctors, or stupid lawyers). So you may have managers which
underperform the market systematically given the risk of the portfolio
they are managing (they choose systematically stocks with low risk-
adjusted returns).
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PeterL
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| Posted: Wed Mar 28, 2007 3:52 am Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
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On Mar 27, 9:43 am, "jose.bai...@gmail.com" <jose.bai...@gmail.com>
wrote:
| Quote: |
Again, if you forget for one minute the self-publicity side of this
article from Motley Fool these 7 recommendations look pretty
sensible. To those who focus mostly on short term results, point 4/
is pretty useful:
|
All good advice, but how would that translate to "nearly double the
markets' return"? |
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Turtle
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| Posted: Wed Mar 28, 2007 1:38 pm Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
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Hi everyone,
| Quote: |
Again, if you forget for one minute the self-publicity side of this
article from Motley Fool these 7 recommendations look pretty
sensible.
|
It also maks sense to me.
| Quote: |
Indeed -- though some of us might reach a slightly different conclusion than
others from these recommendations:
1. Invest in the Manager, Not the Fund- When you buy a mutual fund,
you're hiring a stock-picker. A fund can only be as strong as its
stock-picker-in-chief.
This may be an argument in favor of index funds. Because when you buy an
index fund, you know it's not going to underperform its market segment.
|
One of my funds is an index fond, but it is managed.
| Quote: |
4. Don't Chase Performance - Chasing last year's hot fund is a losing
game.
|
Looking for yesterdays' winners is also done here alot in Germany. Often
yesterdays' loosers do better.
CUL8R
John |
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jose.bailen@gmail.com
Guest
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| Posted: Wed Mar 28, 2007 1:40 pm Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
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On Mar 28, 12:52 am, "PeterL" <po.n...@gmail.com> wrote:
| Quote: |
On Mar 27, 9:43 am, "jose.bai...@gmail.com" <jose.bai...@gmail.com
wrote:
Again, if you forget for one minute the self-publicity side of this
article from Motley Fool these 7 recommendations look pretty
sensible. To those who focus mostly on short term results, point 4/
is pretty useful:
All good advice, but how would that translate to "nearly double the
markets' return"?
|
Nah, this is just bullshit. That's the self-publicity aspect of this
post that should be set aside. You can only get higher markets' return
in the long term (that's quite important - the long term part-) if you
are willing to accept higher risks. |
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David
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| Posted: Wed Mar 28, 2007 1:47 pm Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
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On Mar 27, 8:49 pm, "Ed" <fri...@fishinthe.net> wrote:
| Quote: |
"David" <d...@wilkinson6337.freeserve.co.uk> wrote
According to Malkiel and others there is no such thing as stock-
picking ability. Managers that do well in one period do not show any
greater ability in later periods than average, showing that results
are largely due to chance. The average managed fund lags the market by
about 2% p.a. due to fees and costs due to high turnover (Bogle) and
over the long term they are all average. Only low cost index funds
buying the total market (not Nasdaq) can roughly equal the market and
beat 80% of managed funds.
But they don't.
They do according to Bogle. See his "The little book of common sense |
investing" and below.
| Quote: |
The actively managed funds that beat the market last year have no more
chance of doing so next year than any others. The Motley Fool has no
idea which funds will do well next year. Low costs are very important
but so are index funds.
How about over time. There are many funds that beat their benchmark over
long periods of time.
Bogle looked at the 355 funds, presumably all managed, that existed in |
1970, 36 years ago. Of these, 223 have since gone out of business and
there are 132 survivors. Of the survivors, 42 beat the maket by any
amount, which is just 12% of the original set. The survivors lagged
the market by 0.7% on average but if you include the non-survivors the
performance would be much worse.
Since you have no way of knowing in advance which managed funds will
do well and which will tank, there is a 63% chance the fund will go
out of business over this sort of period and an 88% chance it will not
even equal the market. Fairly good odds in favour of index funds!
| Quote: |
Don't chase hot funds-agreed, but there is no way of rigorously
selecting next year's fund winners, or stocks come to that. There are
no known future great funds or managers or companies, just past ones.
No one knows the future except in general terms.
Agreed.
6. Choose Shareholder-Friendly Funds - I select funds with a record
of putting their shareholders first. I look for honest and open
shareholder letters, falling expense ratios, and fund managers who
close funds to new investors when they become too big.
Low fees and no loads covers most of it.
7. Find Managers Who Eat Their Own Cooking - Why should you invest
with a fund manager who isn't also putting his money on the line next
to yours? You'd be amazed if you knew how many fund managers don't
have a dime invested in the funds they run. We make a point to look
for funds where the managers have a big chunk of their own money
riding along with yours. It's the best way to know that they take your
best interests to heart.
How do you know what the managers invest in? I am fairly sure the UK
data protection act would judge this was private information no one
has a right to know.
It's usually in the SAI. The problem is that they rarely tell you how much
the manager has invested.
Morningstar ranks funds for risk adjusted return. Five stars possible. 5
stars = top 20% in category, 4 = next 20% etc.
All Vanguard, all index:
500 Fund 3
Balanced 4
Emerging Markets 3
European Stock 3
Extended Market 3
Growth 3
Large Cap 4
Mid Cap 4
Small Cap 3
Small Cap Value 3
Total Stock Market 4
Total Int'l Stock 4
Value 4
I would give you the 5 year rank for these index funds but whenever I do
that people always say that you have to give the 150 years or more so I'll
pass.
If you really want to know:http://biz.yahoo.com/p/fam/vanguard.html
Click on profile and then performance.- Hide quoted text -
- Show quoted text - |
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Ed
Guest
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| Posted: Wed Mar 28, 2007 2:26 pm Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
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"David" <david@wilkinson6337.freeserve.co.uk> wrote in message
news:1175071679.413561.59650@n59g2000hsh.googlegroups.com...
| Quote: |
On Mar 27, 8:49 pm, "Ed" <fri...@fishinthe.net> wrote:
"David" <d...@wilkinson6337.freeserve.co.uk> wrote
According to Malkiel and others there is no such thing as stock-
picking ability. Managers that do well in one period do not show any
greater ability in later periods than average, showing that results
are largely due to chance. The average managed fund lags the market by
about 2% p.a. due to fees and costs due to high turnover (Bogle) and
over the long term they are all average. Only low cost index funds
buying the total market (not Nasdaq) can roughly equal the market and
beat 80% of managed funds.
But they don't.
They do according to Bogle. See his "The little book of common sense
investing" and below.
|
He spent his life sellimg index funds. He owns managed funds.
| Quote: |
How about over time. There are many funds that beat their benchmark over
long periods of time.
Bogle looked at the 355 funds, presumably all managed, that existed in
1970, 36 years ago. Of these, 223 have since gone out of business and
there are 132 survivors. Of the survivors, 42 beat the maket by any
amount, which is just 12% of the original set. The survivors lagged
the market by 0.7% on average but if you include the non-survivors the
performance would be much worse.
Since you have no way of knowing in advance which managed funds will
do well and which will tank, there is a 63% chance the fund will go
out of business over this sort of period and an 88% chance it will not
even equal the market. Fairly good odds in favour of index funds!
|
You must be using the numbers from when there were only 355 funds.
There are well over 10,000 now, I don't think 6,300 of them will close shop. |
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Ed
Guest
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| Posted: Wed Mar 28, 2007 3:21 pm Post subject: Re: Motley Fool:7 Secrets to Earning Nearly DOUBLE the Marke |
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"David" <david@wilkinson6337.freeserve.co.uk> wrote
The average managed fund lags the market by
| Quote: |
about 2% p.a. due to fees and costs due to high turnover (Bogle) and
over the long term they are all average. Only low cost index funds
buying the total market (not Nasdaq) can roughly equal the market and
beat 80% of managed funds.
But they don't.
They do according to Bogle. See his "The little book of common sense
investing" and below.
|
I'm not a professional investor. I beat the Vanguard 500 and Total Stock
Market Index funds all the tme.
I don't recall if this is our second or third contest but you know that, at
least as long as we've been in our contests.
Last year:
Dec 29, 2006
Ed $121,620.03
SPY $115,118.63
This year:
March 26, 2007
EdS $103,284.00
SPY $100,666.90
EdF $100,664.90 (it's early) |
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