Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Do money managers earn their keep?
Old 03-14-2006, 09:44 AM   #1
Thinks s/he gets paid by the post
Jay_Gatsby's Avatar
 
Join Date: Oct 2004
Posts: 1,719
Do money managers earn their keep?

Interesting article on Yahoo! Finance regarding whether money managers earn their keep:

http://biz.yahoo.com/special/2fund06_article1.html

__________________

__________________
He had one of those rare smiles with a quality of eternal reassurance in it . . . It faced, or seemed to face, the whole external world for an instant and then concentrated on you with an irresistible prejudice in your favor. -- The Great Gatsby, F. Scott Fitzgerald
Jay_Gatsby 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!

Re: Do money managers earn their keep?
Old 03-14-2006, 09:49 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Do money managers earn their keep?

Short answer: no.

I thought it was interesting that the guy writing the article characterized funds costing .4-1.1 and up as "inexpensive".

I make sour lemon face whenever I see any individual fund that runs over .50. It better be something pretty special...
__________________

__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 10:53 AM   #3
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Re: Do money managers earn their keep?

Quote:
Originally Posted by Cute 'n Fuzzy Bunny
Short answer: no.

I thought it was interesting that the guy writing the article characterized funds costing .4-1.1 and up as "inexpensive".

I make sour lemon face whenever I see any individual fund that runs over .50. It better be something pretty special...
well if you get into international and emerging markets even index funds and etf's are in the 55 - 80bps range

__________________
saluki9 is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 10:55 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Re: Do money managers earn their keep?

VWO - 0.3
EFA - 0.35
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 11:05 AM   #5
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Re: Do money managers earn their keep?

Quote:
Originally Posted by HFWR
VWO - 0.3
EFA - 0.35
EEM 77BPS

EPP 50 BPS

ILF 50 bps

DFISX 69bps

DISVX 79bps


My point was that you can't always get exposure to certain market segments that (I ) would like to for 15bps

__________________
saluki9 is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 11:13 AM   #6
Thinks s/he gets paid by the post
 
Join Date: Jul 2004
Posts: 1,505
Re: Do money managers earn their keep?

Mutual fund performances include the management fees, so if you slap them up on a graph against their respective index, and the manager hasnt changed over the period of time, and the actively managed fund is winning (significantly), then it is worth it.

Take an example of one i own; Slap Janus Overseas over the top of the EAFE and decide for yourself if the 1.x% management fee is worth it. Again, remember, the actual fee is reflected in the performance.

I hear index funds beat 75-80% of actively managed funds. It makes me so thankful i'm not forced to pick a random, actively managed fund!
__________________
azanon is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 11:39 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Re: Do money managers earn their keep?

FWIW: Fidelity Spartan Intl Investors (FSIIX) with an effective ER of .10 is a good deal in a broad international index fund. The ER is this low only due to refunds by the management team, but if the ER shoots up in the future I'll take my marbles to Vanguard (it is a Roth IRA, so no tax consequences for moving it).

__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 12:15 PM   #8
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Re: Do money managers earn their keep?

Quote:
Originally Posted by samclem
FWIW:* Fidelity Spartan Intl Investors (FSIIX)* with an effective* *ER of .10 is a good deal in a broad international index fund.* *The ER is this low only due to refunds by the management team, but if the ER shoots up in the future I'll take my marbles to Vanguard (it is a Roth IRA, so no tax consequences for moving it).
It's posts like these that make me wonder why we're still paying 1.38% for Tweedy, Browne Global Value (TBGVX).

But then it goes up another 1.5-2% that month... for the ninth or tenth month in a row... and somehow I never get around to doing anything about it.

Maybe it's because the managers seem to be such wild-eyed, thrill-seeking, extreme-sports happy-go-lucky free spirits.
Attached Images
File Type: jpg Tweedy.jpg (1.5 KB, 99 views)
File Type: jpg Browne.jpg (1.5 KB, 97 views)
__________________
*
*

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
Re: Do money managers earn their keep?
Old 03-14-2006, 12:18 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Do money managers earn their keep?

Quote:
Originally Posted by saluki9
well if you get into international and emerging markets even index funds and etf's are in the 55 - 80bps range
Depends on how you get it. I dont own any funds earmarked "international", but in the target retirement and other funds I own according to the vanguard portfolio x-ray, 7.5% of my portfolio is "international stock". My ER is .19. I think my most expensive fund holding is .25.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 01:11 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,284
Re: Do money managers earn their keep?

Quote:
Originally Posted by azanon
I hear index funds beat 75-80% of actively managed funds. It makes me so thankful i'm not forced to pick a random, actively managed fund!

True, but how do you know any selected managed fund will continue to outperform? Maybe their style was right for the past environment and wrong for the future one.

I could say the same thing about individual stocks. Plenty of them that beat the index by leaps and bounds. But how do you pick them out of the group, and how do you know they won't be losers after you buy them?

-ERD50
__________________
ERD50 is online now   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 01:17 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Re: Do money managers earn their keep?

Quote:
Originally Posted by saluki9
EEM* 77BPS

EPP 50 BPS

ILF 50 bps

DFISX 69bps

DISVX* 79bps* *


My point was that you can't always get exposure to certain market segments that (I ) would like to for 15bps.
And my CEE is 1.2%...
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 01:23 PM   #12
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Re: Do money managers earn their keep?

Quote:
Originally Posted by Cute 'n Fuzzy Bunny
Depends on how you get it. I dont own any funds earmarked "international", but in the target retirement and other funds I own according to the vanguard portfolio x-ray, 7.5% of my portfolio is "international stock". My ER is .19. I think my most expensive fund holding is .25.
The Vanguard total Int'l Index which is what they use in the target retirement funds has an er of .31. That is elavated because of an allocation to the emerging markets fund which has an er of .45

__________________
saluki9 is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 02:39 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Jul 2004
Posts: 1,505
Re: Do money managers earn their keep?

Quote:
True, but how do you know any selected managed fund will continue to outperform? Maybe their style was right for the past environment and wrong for the future one.

I could say the same thing about individual stocks. Plenty of them that beat the index by leaps and bounds. But how do you pick them out of the group, and how do you know they won't be losers after you buy them?
Ultimately, that the decision before you.* *Do you think that perhaps they just had a style condusive to the market they performed in, or do you believe its likely they are truly talented at what they do, and can adapt to even new scenarios.* * I think there are some you can feel that the latter is more likely than the former, and ultimately what do you have to lose..... they they just end up performing average, or (gasp) a few tenths worse than the index?

I would like to see what percent of stock funds the S&P500 has beaten since 2001.* I bet it isnt even 30%.

Ive said before I think this forum community overemphasizes the impact of management fees.* Far more important to 1. Simply invest enough 2. Have appropriate asset allocation* 3.* Not market time* *Do those 3 things and the rest is minor details. Not doing one of these 3 things properly are the only things that are going to really screw your retirement portfolio.
__________________
azanon is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 03:10 PM   #14
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
Re: Do money managers earn their keep?

Quote:
Originally Posted by azanon
I would like to see what percent of stock funds the S&P500 has beaten since 2001. I bet it isnt even 30%.

Ive said before I think this forum community overemphasizes the impact of management fees. Far more important to 1. Simply invest enough 2. Have appropriate asset allocation 3. Not market time Do those 3 things and the rest is minor details. Not doing one of these 3 things properly are the only things that are going to really screw your retirement portfolio.
Like it or not, costs matter. I would submit costs are one of the MOST important elements affecting investment returns, and one that is easily controlled with a substantial degree of certainty.

VFINX - Vanguard S&P 500 fund - Outperformed 58% of funds over 5 years and 74% of funds over 10 years in the Large Blend category of funds (per morningstar.com)

VTSMX - Vanguard Total Stock Market Index - Outperformed 81% of funds over 5 years and 77% of funds over 10 years in the Large Blend category of funds (per morningstar.com).

I'll take those odds. "Above average" is ok with me.

I'm sure you'll find a dozen actively managed international small cap value commodities leveraged funds to refute my point.

__________________
justin is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 03:18 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,615
Re: Do money managers earn their keep?

I'm among those who think expenses matter quite a lot.

- $100K invested in a fund for 20 years and gets 7% return.
-- If your ER is .20 %, then total value will be $371K
-- If your ER is 1.2 %, then total value will be $304K


- Or, from a viewpoint we can all appreciate on ths board: We spend a lot of time discussing the annual safe withdrawal rate. The difference between a 3% and a 4% withdrawal is a lot when it comes to real qualty of life for many of us. So, if you are in that position, would you choose to take a 3% withdrawal rate and give the other 1% to mutual fund expenses? I guess that would make sense if you were highly confident that the management team added a lot of value--I'm not convinced that many do, and I'm even less convinced that I can pick 'em in advance. So, I'll stick with the low-ER funds and use the bucks for something else.

samclem
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 04:14 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Do money managers earn their keep?

Quote:
Originally Posted by saluki9
The Vanguard total Int'l Index which is what they use in the target retirement funds has an er of .31. That is elavated because of an allocation to the emerging markets fund which has an er of .45
I think I'm paying a smaller percentage due to the scale of the holdings of the sub funds by the main TR fund. I dont think i'm paying much extra, as if I held just the other parts of the TR on their own in proportional amounts, the overall average ER I'd be paying wouldnt be significantly lower. It seems to me to be a way to get a little international exposure without paying full price.

__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 04:20 PM   #17
Thinks s/he gets paid by the post
maddythebeagle's Avatar
 
Join Date: Jun 2005
Posts: 2,450
Re: Do money managers earn their keep?

Quote:
- Or,* from a viewpoint we can all appreciate on ths board:* We* spend a lot of time discussion the safe withdrawal rate each year.* The difference between a 3% and a 4% withdrawal is a lot when it comes to* real qualty of life for many of us.
or how about having to work a few more years, because you transferred some of your wealth to mutual funds/investment advisors
__________________
- Hurry! to the cliffs of insanity!
maddythebeagle is offline   Reply With Quote
Re: Do money managers earn their keep?
Old 03-14-2006, 09:56 PM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,284
Re: Do money managers earn their keep?

Quote:
Originally Posted by azanon
Do you think that perhaps they just had a style condusive to the market they performed in, or do you believe its likely they are truly talented at what they do, and can adapt to even new scenarios. I think there are some you can feel that the latter is more likely than the former,
Well, actually, I've been looking at the Fairholme Fund (FAIRX) - it does seem to do slightly
better in both Up/Down markets:

http://tinyurl.com/hq3oz


-ERD50
__________________

__________________
ERD50 is online now   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
Automatic payments from a money market (savings) account a FIRE and Money 4 04-07-2007 01:14 PM
Anyone else fed up of saving money for ER/FI? claire FIRE and Money 63 06-08-2006 11:31 AM
Time vs. Money Mountain_Mike Other topics 40 10-23-2005 09:28 PM
Money market in 401K Bill FIRE and Money 2 05-31-2003 08:15 AM

 

 
All times are GMT -6. The time now is 09:47 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.