Dave Ramsey said what??...

[wildcat]

Quote:

Check your research. Its more like 70%. A figure that would concern me if i were forced to randomly pick my actively managed fund

Depends on the time horizon grasshopper.

[azanon]

Don't get me wrong, I admit personal hangups with loads and always filter them out when picking one myself. That being said, I find it quite difficult to fault my brother-in-law's choice to go with them since i know he has been with them for years, and the upfront loads have probably gone to obscurity by now. And that's because the ones he has were pretty much beating mine.

[wildcat]

Holy sh!t!!! JG is back. When did that happen??

In his honor I am doing a triple post. Here's to ya JG.

[azanon]

Quote:

Originally Posted by wildcat Depends on the time horizon grasshopper.

For the time horizon of 2001+, I believe active managed funds are actually beating index. Put any average growth fund against an S&P500 index for 2000+ to see what i mean.

So thanks for pointing that out; i'm overestimating that percertage for some time periods.

None of this changes my general point; i'm not forced to randomly pick my active managed fund. The day that i am, i will gladfully switch to index because it'd be illogical not to, and i'm a logical atheist.

[ats5g]

Quote:

Originally Posted by Azanon For the time horizon of 2001+, I believe active managed funds are actually beating index. Put any average growth fund against an S&P500 index for 2000+ to see what i mean. So thanks for pointing that out; i'm overestimating that percertage for some time periods. None of this changes my general point; i'm not forced to randomly pick my active managed fund. The day that i am, i will gladfully switch to index because it'd be illogical not to, and i'm a logical atheist.

eh, you might want to recheck the figures "since 2001" according to Standard and Poors, from their 3rd quarter 2006 scorecard:

Quote:

Over longer time horizons, we continue to observe index outperformance. Over the past three years, the S&P 500 has outperformed 68.1% of large-cap funds, the S&P MidCap 400 has outpaced 66.9% of mid-cap funds, and the S&P SmallCap 600 has outperformed 81.1% of small-cap funds. Similarly, over the past five years, the S&P 500 has beaten 70.9% of largecap funds, the S&P MidCap 400 has outperformed 83.6% of mid-cap funds, and the S&P SmallCap 600 has outperformed 80.5% of small-cap funds.

Note the 5 year figures.

Hey, if ya'll want to go with active management, more power to you. However, there are plenty of no-load active funds with just as good records as the American Funds. But, let's face facts, there is simply no way to tell which active funds will continue with their outperformance, and which won't. If there were, I'm sure any broker or newsletter personality that's peddling them would be glad to make up the underperformance of any funds he/she recommends from their personal funds. yeah right...

- Alec

[Dawg52]

Quote:

Originally Posted by wildcat Full disclosure: After reading Dog's (still up for a wager this weekend?? ) post, I now hope Dave & his envelopes & Ray and his buckets go to hell.

Cat,
My bullies are pitiful again this year but the cats don't look much better. Lets wager a cold one. Payoff, somewhere down the road.

[samclem]

A post by TimDex at the Diehards forum seems germane:
__________________________________________________ _______
Reading the WSJ this morning---an article on investors chasing the rising market by buying Dow indexes. It included a quote that one doesn't often hear from people with stock brokerages:

"Individual investors tend to have a big leg up on Wall Street firms because they can take a longer time horizon," says Richard Bernstein, chief U.S. investment strategist at Merrill Lynch. "If you use that leg up to invest in indexes for the long term, it can work well."
__________________________________________________ _______
Taylor opined that Mr Bernstein might soon be out of a job.
It can be dangerous to tell the truth!

[CaptCurmudgeon]

Re: Dave & Christian Dogma

One of Dave's oft quoted Bible verses warns about debtors being slaves to their creditors. This dogma lines up with every religion I know of, including atheism. Well, maybe not capitalism. Whoever has been deeply in debt knows that feeling intimately well.

He has helped a whole lot of people where no direction or practical guidance was forthcoming by the education system, a consumer society or that wonderful example of fiduciary responsibility, the U.S. of A govmint.

I do not believe he is trying to throw his faith in the face of his audience, I believe he is just trying connect with some of his listeners.

[Nords]

Quote:

Originally Posted by ats5g However, there are plenty of no-load active funds with just as good records as the American Funds.

I only want to invest with the no-load active funds that offer rebates for underperforming their benchmarks.

Until then I'll stick with indices & ETFs.

[Mr._johngalt]

Quote:

Originally Posted by wildcat Holy sh!t!!! JG is back. When did that happen?? In his honor I am doing a triple post. Here's to ya JG.

Back at ya bro.

JG

[ats5g]

Quote:

Originally Posted by Nords I only want to invest with the no-load active funds that offer rebates for underperforming their benchmarks. Until then I'll stick with indices & ETFs.

[Merlin]

I am able to buy American's Washington Mutual without a load in my 401k. Washington Mutual is the only American I have any experinece with.

Here is the performance record for Washington and Vanguard Value Index, both Large Cap Value Funds:

American Funds Washington Mutual A

YTD 11.00%
1-yr 6.28%
3-yr 10.31%
5-yr 6.4%
10-yr 9.41%

Vanguard Value Index Fund

YTD 13.29%
1-yr 15.1%
3-yr 16.8%
5-yr 9.56%
10-yr 9.63%

[saluki9]

Quote:

Originally Posted by Merlin I am able to buy American's Washington Mutual without a load in my 401k. Washington Mutual is the only American I have any experinece with. Here is the performance record for Washington and Vanguard Value Index, both Large Cap Value Funds: American Funds Washington Mutual A YTD 11.00% 1-yr 6.28% 3-yr 10.31% 5-yr 6.4% 10-yr 9.41% Vanguard Value Index Fund YTD 13.29% 1-yr 15.1% 3-yr 16.8% 5-yr 9.56% 10-yr 9.63%

You should also consider that AWSHX only takes about 85-90% of the risk that VIVAX does.

[rockyj]

Quote:

Originally Posted by Merlin IHere is the performance record for Washington and Vanguard Value Index, both Large Cap Value Funds: <performance numbers snipped here>

I never listen to Dave Ramsey but the reference to American Funds (of which I recently purchased a few) and subsequent discussion has piqued my interest. Perhaps this should be the start of a separate thread (or has been beaten to death in a previous thread), but to add add some performance numbers for comment:

Several American Funds (recently purchased)
(September 30 - 1, 5 and 10 year, reflecting max 5.75% sales charge - larger purchses reduce sales charge so numbers would be proportionally higher):

Growth Fund of America AGTHX 3.18 8.86 12.41
Income Fund of America AMECX 6.75 9.20 9.51
Washington Mutual Inv. Fund AWSHX 6.27 6.4 9.41
Capital Income Builder CAIBX 7.76 10.71 10.73
Capital World Growth & Inc CWGIX 10.59 14.87 13.09

A couple of no-load active funds I've held for a long time:
(September 30 - 1, 5, and 10 year - no slaes charge)

Dodge and Cox Stock 14.61 14.06 14.47
VG Healthcare 13.25 9.77 16.85


Some VG Index Funds for Comparison (all of which I hold):
(September 30 - 1, 5, and 10 year - no sales charge - all investor class not admiral)

VG 500 Index 10.63 6.85 8.51
VG Total Stock Mkt Idx 10.25 8.45 8.56
VG Value Index 11.56 9.56 9.63


A couple of VG income/value/dividend active funds:

VG Wellesley Income Fund 7.61 6.77 8.92
(because I see it mentioned here a lot)

VG Windsor II 10.99 9.88 10.51
(because I own it)

Without getting specific about asset allocation, and admitting that I've probably got
a more complicated mix of funds than many would advocate, I take an approach
that includes core index fund holdings (across several asset classes, mostly equities) and a roughly equivalent amount of active bets (similarly diversified across asset classes). I do an ocassional fund xray to keep track of overall asset allocations. During accumulation I use new funds (mostly DCA into 403b and Roths) to keep asset allocations in line with my targets. I imagine I'll simplify holdings as I approach withdrawal phase (or tire of tinkering).

Anyway, it seems to me that, given the 10 yr numbers above (and the relative longer term consistency of returns for some of the better established funds and companies (those with committee approaches, not star managers that can leave)), that there is case to be made for active funds in an overall portfolio (assuming the obvious - reasonable expenses, turnover, etc.). Loads clearly are another issue and much more suspect (despite my recent American purchase). In general, the active funds I've been holding have done well over time (too soon to tell on the American additions).

I'm not trying to data mine in the above, just using most recent numbers for several funds related to the discussion. I also realize that the diversified funds above don't correspond to the indices on which the index funds are based, but no one buys the index itself, just available funds. And, yes, small caps and foreign have been on a tear and some of those are in some of the diversified active funds above, and I didn't cite the comparable index funds. Nevertheless, what I'm really interested in are anyone's thoughts on (and experiences with) the general approach of diversification not only among asset classes but also across a carefully selcted mix of index and active funds.

[justin]

Quote:

Originally Posted by sparkythewonderdog Nevertheless, what I'm really interested in are anyone's thoughts on (and experiences with) the general approach of diversification not only among asset classes but also across a carefully selcted mix of index and active funds.

Up until 1.5 years ago, I invested only in American Funds (primarily Growth Fund of America, Capital Income Builder, and Washington Mutual Investors Fund, with a little New Perspective and AMCAP fund).

The expense ratios are generally fairly decent, even with the 0.25% 12b-1 fee. I got into a lot of them at the $100,000 breakpoint load level (3-3.5%?).

I switched my investing to primarily index funds or active funds with very low expense ratios about 1.5 years ago. All my future investment dollars are going to these index or low cost actively managed funds.

Over time, my American funds will become a smaller proportion of my total portfolio. And I don't consider the Am Funds in my asset allocations for my index/low cost portfolio. So, yes, I do diversify between actively managed and passively managed funds.

If I was able to do it all over again knowing what I know now, I would have picked some actively managed funds at Vanguard with no loads and slightly lower expense ratios.

Now my dilemma is whether to sell the Am Funds mutual funds and switch over to Vanguard funds to save ~20 basis points/yr in expenses.

[FinanceDude]

Quote:

Originally Posted by justin Up until 1.5 years ago, I invested only in American Funds (primarily Growth Fund of America, Capital Income Builder, and Washington Mutual Investors Fund, with a little New Perspective and AMCAP fund). The expense ratios are generally fairly decent, even with the 0.25% 12b-1 fee. I got into a lot of them at the $100,000 breakpoint load level (3-3.5%?). I switched my investing to primarily index funds or active funds with very low expense ratios about 1.5 years ago. All my future investment dollars are going to these index or low cost actively managed funds. Over time, my American funds will become a smaller proportion of my total portfolio. And I don't consider the Am Funds in my asset allocations for my index/low cost portfolio. So, yes, I do diversify between actively managed and passively managed funds. If I was able to do it all over again knowing what I know now, I would have picked some actively managed funds at Vanguard with no loads and slightly lower expense ratios. Now my dilemma is whether to sell the Am Funds mutual funds and switch over to Vanguard funds to save ~20 basis points/yr in expenses.

I have owned American Funds for 20 years and have never been sorry. They are the ONE fund company John Bogle said he would invest in if no-loads were not available...............

[justin]

Quote:

Originally Posted by FinanceDude I have owned American Funds for 20 years and have never been sorry. They are the ONE fund company John Bogle said he would invest in if no-loads were not available...............

I noticed that, too. I figure if they pass John Bogle's sniff test, then they can't be too bad. We'll see how asset bloat affects their performance. Supposedly they have a multi-portfolio management system (at least for Growth fund of america) where the total fund assets are sort of split into different pots of money with a manager managing each pot of money separately, and one pot of money being managed by the analysts and by committee.

[saluki9]

Quote:

Originally Posted by justin I noticed that, too. I figure if they pass John Bogle's sniff test, then they can't be too bad. We'll see how asset bloat affects their performance. Supposedly they have a multi-portfolio management system (at least for Growth fund of america) where the total fund assets are sort of split into different pots of money with a manager managing each pot of money separately, and one pot of money being managed by the analysts and by committee.

They manage all of their funds that way

[justin]

Quote:

Originally Posted by saluki9 They manage all of their funds that way

Do you have an opinion as to whether this should reduce the impact of asset bloat on their performance?

[saluki9]

Quote:

Originally Posted by justin Do you have an opinion as to whether this should reduce the impact of asset bloat on their performance?

On the equity side, I don't really think it does. It depends on whether you think asset bloat affects whether alpha generating opportunities are available at all, or just to one specific analyst or manager. When you have a fund as large as growth fund of America or Capital Income Builder, etc there are just so many large cap stocks to consider and it gets very hard to take a position large enough to move the fund as a whole. I don't think that having one manager or 10 is going to change that. When it takes $1,000,000,000 of any security to make a 1% position in your fund you're going to wind up with something akin to a closet index fund. It certainly is a larger factor in small cap offerings. I also believe that the team approach makes it much harder to analyze the fund for manager changes.

On the fixed income side I don't think asset bloat is as big an issue as long as you're talking about a general fund like Income fund of America. In theory a larger asset base should make it harder for the managers of the High Income Trust, but that has not happened yet.