Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Charts and Graphs that make you go "Hmmm"
Old 09-20-2007, 11:44 AM   #1
Thinks s/he gets paid by the post
ladelfina's Avatar
 
Join Date: Oct 2005
Posts: 2,713
Charts and Graphs that make you go "Hmmm"

Leafing just yesterday through the free Schwab magazine (I wish they would save money and not send it me).. I came across this inexplicable chart:
http://oninvesting.texterity.com/oni...007fall/?pg=12

Which claims annualized return 1986-2006 for "equity mutual fund investors" as follows:

"Average investor" = 4%
"Average systematic investor" = 6%
"Average market timer" = 2%
CPI = 3%; S&P500 index = 12%.

[This is all in the context of denouncing market timers, BTW, but bear with me..]


Source is DALBAR (www.dalbarinc.com) but their reports are for sale so I couldn't check. -- I know the whole routine about how most funds lag the S&P, but I had no idea the magnitude of the figure -- 4% return seems insanely low!

Then today I found this:
http://johncbogle.com/wordpress/2006...l-july-8-2003/



which also references Dalbar.. does anyone have more insight into how this "Dalbar" number is figured? Even if the market timers do half as well as "average", how can it be possible that people switching in and out in a random, blundering way is to blame for a six-to-seven-fold discrepancy between fund performance and "avg. investor" performance?


  • Sometimes you will find something of value in fluff publications
  • It's funny the Schwab chart, intending to prove something else, gives the lie to arguments for equity-fund investing made on the other pages of their same magazine.
  • I may become a "Boglehead" (though I am not sure of exactly what that means nor all the ramifications thereof)!
__________________

__________________
ladelfina is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-20-2007, 12:10 PM   #2
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Quote:
Originally Posted by ladelfina View Post
Leafing just yesterday through the free Schwab magazine (I wish they would save money and not send it me)..
Well, you know it's not free... it's paid for by Schwab's grateful marketing customers!

Quote:
Originally Posted by ladelfina View Post
I know the whole routine about how most funds lag the S&P, but I had no idea the magnitude of the figure -- 4% return seems insanely low!
Then today I found this:
The Bogle eBlog Blog Archive The Emperor's New Mutual Funds
which also references Dalbar.. does anyone have more insight into how this "Dalbar" number is figured? Even if the market timers do half as well as "average", how can it be possible that people switching in and out in a random, blundering way is to blame for a six-to-seven-fold discrepancy between fund performance and "avg. investor" performance?
I think they either studied the money flowing through various mutual funds or else they actually aggregated the data for cash flows into/out of individual investor's accounts. Peter Lynch alluded to a similar issue with Fidelity Magellan investors during his years.

Either way there's a lot of selling at the bottom, buying at the top, chasing last year's winners, paying a lot of short-term cap gains taxes... you name it.

Here's one of many summaries of the Dalbar & Bogle refrains:
Grubman Financial Consulting - The Average Investor's Returns

BTW Schwab's reputation took a big hit in 2003-2004 for their "new" stock-ranking system which suggested that their shareholders should dump their "F"-graded stocks and only buy "A"-graded stocks. You can guess which stocks outperformed by a wide range over the following 1-2 years of recovery.

Quote:
Originally Posted by ladelfina View Post
[*] I may become a "Boglehead" (though I am not sure of exactly what that means nor all the ramifications thereof)!
You're going to have to lurk the Vanguard Diehards and Bogleheads discussion boards before wearing that moniker proudly... Taylor, Mel, & Michael have also written a book.

Guide to the Vanguard Diehards Forums
(M* has apparently changed their forum software again and it's annoying a lot of the long-time posters. Larry Swedroe is now only posting at the Bogleheads forum.)
Amazon.com: The Bogleheads' Guide to Investing: Books: Taylor Larimore,Mel Lindauer,Michael LeBoeuf,John C. Bogle
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 09-20-2007, 12:32 PM   #3
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
I may be making this all up, but Bogle's Common Sense on Mutual Funds discussed poor actual performance of mutual fund investors (ie - s&p returns > avg mutual fund return > avg mutual fund investor return).
__________________
justin is offline   Reply With Quote
Old 09-20-2007, 01:00 PM   #4
Thinks s/he gets paid by the post
ladelfina's Avatar
 
Join Date: Oct 2005
Posts: 2,713
Tnx for Grubman link; v. innerestin. I guess that there's market-timing that's not consciously market-timing (along with all the other stuff you mentioned), but whatever it is, it's alarming! (But I guess better for us if we don't fall prey to it.)

Yeah, I'm aware that Schwab wants transactions (just like Vanguard, for all its 'purity' wants mgmt. fees). Makes me feel less terrified about my 'risky' mostly-stock holdings. I only seem to screw up a little when I buy, and more when I sell! But when I hold everything seems apparently copacetic... ;-) La la la la la...
__________________
ladelfina is offline   Reply With Quote
Old 09-20-2007, 01:01 PM   #5
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
Well here goes...

H'mmm
__________________
MasterBlaster is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
MY "best" friend really baffles me. Friends? hmmm... (long) thefed Other topics 37 09-21-2007 05:36 PM
"The 30s are a real make-or-break decade for many people." lrak Young Dreamers 34 02-13-2007 08:02 PM
"Mexico~We can not make you leave" mickeyd Other topics 0 09-03-2006 01:18 PM
Book reports: "Blink" & "Tipping Point" Nords Other topics 2 12-04-2005 05:15 PM
If You Make "x", Then You Can Afford "y" Tommy_Dolitte Young Dreamers 14 11-03-2004 06:30 PM

 

 
All times are GMT -6. The time now is 12:26 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.