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Us vs. Them (again)
Old 01-28-2007, 04:08 PM   #1
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Us vs. Them (again)

Quote:
The S&P 500 did better than large-cap funds by more than 3 percent and the S&P SmallCap 600 beat smallcap funds by nearly 2 percent. Actively managed midcap funds topped the S&P MidCap 400 by 0.34 percent.

For the past five years, the S&P 500 has beaten 71.4 percent of large-cap funds, while the S&P MidCap 400 has outperformed 79.7 percent of midcap funds. The S&P SmallCap 600 has done better than 77.5 percent of small cap funds.
This everlasting debate is once again used as a topic for discussion.

http://www.eons.com/money/feature/growthenestegg/13000
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Re: Us vs. Them (again)
Old 01-28-2007, 04:24 PM   #2
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Re: Us vs. Them (again)

Uh, we don't invest in those 80% of the funds that do worse than an index. We invest in the 20% that do better than the indices. Furthermore, many of us have 401(k)s or other plans with a limited fund selection. So we have to pick the better funds from our available funds.
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Re: Us vs. Them (again)
Old 01-28-2007, 04:40 PM   #3
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Re: Us vs. Them (again)

The only debate is why this is still a debate...since the 20% of funds that "outperform" rarely do it two or three years in a row.

Pretty good trick figuring out which one will be the one that beats the index before the year or two when it manages to do it.
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Re: Us vs. Them (again)
Old 01-28-2007, 05:28 PM   #4
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Re: Us vs. Them (again)

I think it's like all the people I've worked with over the years that "always pay for their trip to Las Vegas out of their winnings." I have a stock answer that goes along the lines of --

"Gee, you flew there and stayed in an expensive hotel for 4 days. That must have cost a couple of grand. If I could make that gambling, I don't think I'd come back. You can't make that kind of money at this craphole."

I've migrated almost entirely to indexes. I have a trivial amount of Bank of America because of the dividend and 90+% capital gains and some Dodge & Cox International because it has beaten the index for so long. I also have a good slug of international index.
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Re: Us vs. Them (again)
Old 01-28-2007, 07:05 PM   #5
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Re: Us vs. Them (again)

I was impressed that 40% of a selected group of Playboy bunnies could be the market while only 28 percent of professional investors could.

I was upset when they changed the fund mix for our 401(k) and removed the S&P500 option. Fortunately, they still offer it through a self managed brokerage account associated with the 401(k)
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Re: Us vs. Them (again)
Old 01-28-2007, 07:10 PM   #6
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Re: Us vs. Them (again)

The following has been my investment strategy.

For the past 11 years, I've had 10,000 fund managers flip a coin once a year (10,000 is the approximate number of mutual funds in the United States). The objective has been to flip heads. Heads means you beat the market and tails means you miss the market for a given year. This doesn't include fees and taxes, but everyone knows that fees and taxes aren't important.

After 10 years, 10 of the 10,000 fund managers had flipped heads every single year. Incredible. These 10 guys had to be the most proficient coin flippers in the entire world. True experts. They were guests on dozens of business talk shows, interviewed in countless magazines, and discussed at length on the internet. "How do you do it, Joe? How do you get it right each and every year? Well, Neil, it's all in the wrist. You have to flick the wrist just right. What about you, Bob? What's your strategy for success? You know, a lot of people ask me that. I seek out the fundamentals of coin flipping by analyzing the metal content in each coin I flip. That's they key."

So, after reading about these guys in all those magazines at the supermaket with "10 Hottest Funds" on the cover, I shrewdly invested my money with them. They obviously knew how to flip coins better than any of the other fund managers. I ignored their loads, investment fees, and turnover rates. None of that mattered because they had proven track records of success. Why wouldn't they be equally successful in the future? I wasn't about to support any of the 10 "losers" who flipped tails each year (known as dogs of the coin flippers), nor was I too keen on any of the mediocre coin flippers who were 5-5.

So what happened in year 11? Well, 5 of my 10 expert fund managers got it right once again by flipping another heads. Unbelievable. They've beaten the market 11 out of 11 years. Man, they're good. I'm good. Do I know how to pick funds or what. I've got me some hot funds. I'd be a fool not to keep my money with these guys. Sure, the other 5 experts faltered a bit this year by flipping tails. But that's not so bad. Their 10 year average is still 9 heads and 1 tails, an impressive record. One bad year. So what? As a smart investor, I'm keeping my money with these guys too.

Now, I have a friend who invests almost exclusively in index funds. Sure. They're less expensive than my funds and they have tax advantages because of lower turnover rates. But his guys are coin flipping at only 50% or so. I'm the one with the hot funds. I'm willing to pay the extra 2-3% a year in fees. Big deal. A few percent doesn't matter when you have guaranteed winners like I do in a portfolio. Just look at the records of these guys. All the media pundits are talking about them too. Proof positive. How could I go wrong?

(By the way, if you don't know what sarcasm means, look it up in the dictionary. Also, if you don't know probability, if 10,000 people each flip a coin 10 times, on average, about 10 will flip a heads each time).
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Re: Us vs. Them (again)
Old 01-28-2007, 08:18 PM   #7
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Re: Us vs. Them (again)

http://early-retirement.org/forums/i...hp?topic=661.0
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