"Winning Lazy Portfolios Using Fidelity Funds

[Art G]

Originally Posted by FinanceDude

Oh..........I see. You meant that the individual investor doesn't have the playbook..........

Actually Warren Buffett buys stuff, and THEN it leaks out that Warren is buying (intentionally) and then it causes the "Buffett effect" where crazy buying happens, and he gets the run-up just staying put.........brilliant!!!!

Well yeah, Warren has that edge also. Not being a mutual fund also gives him the freedom not to have to report stuff. I believe Peter Lynch once got in trouble for leaking stuff?
I'd say that in individual investing, there's a bunch of stuff going on that the average investor doesn't know. We've got to be happy taking the dribs and drabs that can be achieved from careful stock selection.
Of course, (and I hate to say this here), investing in only indexes means it doesn't matter what's going on behind the lines.

[FinanceDude]

Originally Posted by Art G

Of course, (and I hate to say this here), investing in only indexes means it doesn't matter what's going on behind the lines.

Which is why a lot of folks do it, they want to do as much autopilot as they can.

I own some individual stocks, and I will admit my biggest LOSSES and biggest GAINS have been in that arena.

It's pretty hard for a mutual fund to go up 1000% in a single year..........

[Midpack]

Originally Posted by Art G

Well yeah, Warren has that edge also. Not being a mutual fund also gives him the freedom not to have to report stuff. I believe Peter Lynch once got in trouble for leaking stuff?
I'd say that in individual investing, there's a bunch of stuff going on that the average investor doesn't know. We've got to be happy taking the dribs and drabs that can be achieved from careful stock selection.
Of course, (and I hate to say this here), investing in only indexes means it doesn't matter what's going on behind the lines.

Ever read The Four Pillars of Investing by any chance?

[unclemick]

Originally Posted by Midpack

Ever read The Four Pillars of Investing by any chance?

1995 - Nephew out of Naval Academy - headed for flight school. Actually asked for my advice.

1. Learn to fly - don't waste time studying stocks.

2. Don't read books! - but read this one - 'Bogle on Mutual Funds.'

3. Max your TSP into the equivalent of 500 Index and don't waste time watching/thinking/worrying. 'God Looks After Drunkards, Fools and The United States of America.'

4. Stay alert - make sure your takeoffs = your landings.

Now after being in So Cal for a while - he slipped and read Four Pillars cause he listened to his buds - but he promised not to touch his 500 index head start or read it again. His retirement is set. You don't need to beat/outperform - you need enough to get the job done and walk away from every landing you make.

heh heh heh - took me forty years to figure that out!

[ERD50]

Originally Posted by Art G

ERD, did you run the chart I suggested? Or any stock?

Sorry, thought you were saying it was forward looking, that I would need historical data on those indicators. Gotcha now. But I'm not very experienced with this. So how about you tell me - what happens next?

It's obvious, but for those unfamiliar, the blue is the stock, red the 50 day moving average, green the 200 day moving average.

I got plenty more. -ERD50

[Art G]

Originally Posted by ERD50

Sorry, thought you were saying it was forward looking, that I would need historical data on those indicators. Gotcha now. But I'm not very experienced with this. So how about you tell me - what happens next?

It's obvious, but for those unfamiliar, the blue is the stock, red the 50 day moving average, green the 200 day moving average.

I got plenty more. -ERD50

LOL! What a chart! What's the time frame there? Darn it, I can't post and review the chart at the same time, but if I remember correctly, the stock had just broken through the resistance line so I'd say it's moving up. However, once it breaks back down below the line I'd definitely want to be out. Rather than try to decipher that jumble, if you tell me the stock symbol, I'll look at it on a better chart and give you a better opinion.
BTW, there are times when the chart shows the stock is trading within a range and not giving an indicator as to which way its' going. In fact, the DJIA is trading as such right now. In that case, my advice is to stay away from that stock. The beauty of trading is that you've got thousands of choices, you don't have to buy them all. One more thing, in my opinion the bible of charting should be from Daily Graphs...
Investor's Business Daily: Premium Services
JMO.

[ERD50]

Originally Posted by Art G

LOL! What a chart! What's the time frame there?

One year time frame. Sometime in the past.

if you tell me the stock symbol, I'll look at it on a better chart and give you a better opinion.

If I tell you the symbol, you have the answer - not much of a test of predictive powers is it? So with that chart, I know the 'future' and you do not. That was the point.

-ERD50

[myself]

Originally Posted by ERD50

One year time frame. Sometime in the past.


If I tell you the symbol, you have the answer - not much of a test of predictive powers is it? So with that chart, I know the 'future' and you do not. That was the point.

-ERD50

Can't you do those on Google's Finance page (or Yahoo's, or BigChart.com's) ?

[dex]

Originally Posted by unclemick

heh heh heh - took me forty years to figure that out!

It seems we humans need to re-discover what to do for ourselves.

[Art G]

Originally Posted by ERD50

One year time frame. Sometime in the past.


If I tell you the symbol, you have the answer - not much of a test of predictive powers is it? So with that chart, I know the 'future' and you do not. That was the point.

-ERD50

Well I'm certainly not afraid of an honest test. If I'm wrong, I'm wrong. Again, the key isn't so much predicting the future, as it is taking the signals that limit your losses. I find the trick to stock selection isn't when to buy, but when to sell.
Now, if you won't give me the stock, at least find me a better chart. Find me a three year chart at the very least. Either that or give me a symbol and we can revisit it in a couple months.

[innova]

TA is witchcraft.

There are several academic studies that completely debunk the notion that there is any value in TA. FWIW, without insider information, fundamental analysis is not a viable strategy for individual investors either. So whats a poor boy to do?

Buy it all. Invest in low-cost indexes and stop watching financial media.

You active-investors types amuse me. In the face of overwhelming evidence against you, you continue to believe in the myth that index fund returns are 'average' (in fact, they are market returns) and that you can 'beat the market'. Active vs. Passive is a zero-sum game.. do you think you have better information than everyone you are competing against in the market? The EMH (efficient market hypothesis) is very well established as an explanation of how prices in the stock market move.

Don't go bringing up Lynch or Buffet. The question is not "why can they beat the market", it is "why aren't there more guys like them"? The EMH would predict that there would be some number of participants that do 'beat the market' at the expense of others that do not.

How do you reconcile your approach with the long-standing fact that active investors underperform over 90% over long spans of time compared to their passive counterparts. Why would you want to play that game?

Let me refute in advance one more argument (I sense it coming). You may say that some active mutual funds beat the s&p 500 every year. First, that may be true for 1, 3, or 5 years. Certainly not 20. Second, the s&p consists of predominantly large-cap, growth stocks. An active fund that 'beats' the s&p 500 will often hold cash, bonds, even foreign securities. So using the s&p as a comparator is flawed. If you construct an appropriate benchmark to those active funds using low-cost indexes, the active fund still loses. It has to, due to trading costs and excessive turnover.

[myself]

Originally Posted by innova

TA is witchcraft.

There are several academic studies that completely debunk the notion that there is any value in TA. FWIW, without insider information, fundamental analysis is not a viable strategy for individual investors either. So whats a poor boy to do?

Buy it all. Invest in low-cost indexes and stop watching financial media.

You active-investors types amuse me. In the face of overwhelming evidence against you, you continue to believe in the myth that index fund returns are 'average' (in fact, they are market returns) and that you can 'beat the market'. Active vs. Passive is a zero-sum game.. do you think you have better information than everyone you are competing against in the market? The EMH (efficient market hypothesis) is very well established as an explanation of how prices in the stock market move.

Don't go bringing up Lynch or Buffet. The question is not "why can they beat the market", it is "why aren't there more guys like them"? The EMH would predict that there would be some number of participants that do 'beat the market' at the expense of others that do not.

How do you reconcile your approach with the long-standing fact that active investors underperform over 90% over long spans of time compared to their passive counterparts. Why would you want to play that game?

Let me refute in advance one more argument (I sense it coming). You may say that some active mutual funds beat the s&p 500 every year. First, that may be true for 1, 3, or 5 years. Certainly not 20. Second, the s&p consists of predominantly large-cap, growth stocks. An active fund that 'beats' the s&p 500 will often hold cash, bonds, even foreign securities. So using the s&p as a comparator is flawed. If you construct an appropriate benchmark to those active funds using low-cost indexes, the active fund still loses. It has to, due to trading costs and excessive turnover.

Well, I certainly don't have any more information than anyone in the markets, since I only use news and earnings as the way I pick stocks.
I don't do index funds anymore. All I kept doing was loosing. Since I stopped that game, I'm up about 46%. Well, CAGR would be more like 18%-19%, since I've only been doing it for not quite 2 years. So far, I've probably been pretty lucky. We'll see how I fare over the next 20 years.

[FinanceDude]

Originally Posted by innova

TA is witchcraft.

There are several academic studies that completely debunk the notion that there is any value in TA. FWIW, without insider information, fundamental analysis is not a viable strategy for individual investors either. So whats a poor boy to do?[/quote]

Care to name said studies??

Buy it all. Invest in low-cost indexes and stop watching financial media.

Hey, most folks do that on here anyways. I was hoping for a bigger nugget of advice........

You active-investors types amuse me. In the face of overwhelming evidence against you, you continue to believe in the myth that index fund returns are 'average' (in fact, they are market returns) and that you can 'beat the market'. Active vs. Passive is a zero-sum game.. do you think you have better information than everyone you are competing against in the market? The EMH (efficient market hypothesis) is very well established as an explanation of how prices in the stock market move.

Well, we all know Art G is an "active investor" as you say.

How do you reconcile your approach with the long-standing fact that active investors underperform over 90% over long spans of time compared to their passive counterparts. Why would you want to play that game?

I make decisions based on more abstract things like beta. If I can get a return thats competitive with the S&P (it doesn't have to beat it) by taking 20% less risk I'll take that all day long.

Let me refute in advance one more argument (I sense it coming). You may say that some active mutual funds beat the s&p 500 every year. First, that may be true for 1, 3, or 5 years. Certainly not 20. Second, the s&p consists of predominantly large-cap, growth stocks. An active fund that 'beats' the s&p 500 will often hold cash, bonds, even foreign securities. So using the s&p as a comparator is flawed. If you construct an appropriate benchmark to those active funds using low-cost indexes, the active fund still loses. It has to, due to trading costs and excessive turnover.

Well, until Morningstar, Lipper, and others change their rating systems to reflect that, you can continue to say how "unfair" that is, but its not going to change.

There are trading costs in index funds too........

[Art G]

ROTFLOL! Crack me right up! First off, check out most American Funds, almost all (if not all stock funds) have beaten the index over the last 5,10,20, whatever years. However, what we're talking about here is selective stock picking, holding cash, and looking for opportunities, and to say that can't beat the index is silly. Just because every investor isn't published in a book somewhere, doesn't mean he's not outperforming.
Selecting the S&P 500 means your only criteria is to pick the 500 biggest stocks. No consideration over results or whether or not the company makes money. If the stock underperforms, well we'll just throw out that stock and pick another coming off a good year. Buying an index fund is like going into a restaurant, asking the waiter what steak is the most tender, and him tell you, "what's the difference, it all comes from a cow".
I'll say it once more, an S&P index fund is that only fund in the world, absolutely, positively, GUARANTEED to underperform the index.
To be honest, I really don't understand why, what seems like a fairly intelligent group of investors, even bother reading this board, if your only intent is to buy the averages? Why aren't you out doing something else? Your investment decisions are done.

[ERD50]

Originally Posted by Art G

Well I'm certainly not afraid of an honest test. If I'm wrong, I'm wrong. Again, the key isn't so much predicting the future, as it is taking the signals that limit your losses. I find the trick to stock selection isn't when to buy, but when to sell.
Now, if you won't give me the stock, at least find me a better chart. Find me a three year chart at the very least. Either that or give me a symbol and we can revisit it in a couple months.

Why do we need to wait a couple months?

Why can't I give you a chart (now you say three year, OK), a three year chart, say from 2001 to 2004, or 1997 to 2000, or 2003 to 2006, or 1974 to 1977. But, I don't tell you the symbol, and you tell me what you think it did next. Then we can see if you were right.

Maybe it would help if you explain your method. It seems to me, if you look at a 200 day MA, you shouldn't need much more history than that, but maybe not.

First off, check out most American Funds, almost all (if not all stock funds) have beaten the index over the last 5,10,20, whatever years.

Give me some ticker symbols. And then we need to factor out survivorship bias. Just because some of their funds may have done better on a risk adjusted basis, doesn't mean that those are the ones I would have picked at the start of the race. We need to look at all their funds that met the criteria at the start. It's easy to pick winners at the finish line.

However, what we're talking about here is selective stock picking, holding cash, and looking for opportunities, and to say that can't beat the index is silly.

You are correct, it *is* a silly thing to say that it *can't* beat the index. Of course selective stock picking can beat the index. As a matter of fact, I would expect a selective stock portfolio to beat the index about 50% of the time, even (especially?) if it was monkeys doing the picking. Logic dictates it.

-ERD50

[innova]

Hey, now this is getting good. *cracks knuckles*

almost all (if not all stock funds) have beaten the index over the last 5,10,20, whatever years.

What index? If you mean s&p 500, perhaps. You would really need to look at their holdings and construct a fair benchmark to be accurate. I'd be quite surprised if that would hold up to scrutiny. Perhaps I'll look into this over the weekend.

Selecting the S&P 500 means your only criteria is to pick the 500 biggest stocks.

Indexing != the s&p 500. Instead of indexing, I should say low-cost, passive investing. This may include the s&p 500, small-cap value index, EAFE, REIT index, and others.

If the stock underperforms, well we'll just throw out that stock and pick another coming off a good year.

If you believe that is how indexes are constructed, you have a lot to learn. Indexes are typically market-cap weighted, and most indexes allow a buffer zone to eliminate excessive turnover due to stocks moving up/down in size. Other passive funds like DFA's funds are not indexes per se, but mechanically constructed funds built off metrics such as PtB and CSRP deciles 1-10.

To be honest, I really don't understand why, what seems like a fairly intelligent group of investors, even bother reading this board, if your only intent is to buy the averages?

No, again you show your lack of knowledge. Index returns are MARKET returns, not average. Most investors on a whole underperform the market return by several percent, due to trading costs, excessive turnover, and taxes. Average return < market return

Are you even aware that passive vs. active is a ZERO-SUM game? Why are you arrogant enough to think that you (or your chosen fund manager) knows more than the rest of the market. Again, I submit that for them to 'win', someone else must be losing. It is a mathematical necessity. We cannot all be above-average.

Care to name said studies??

Certainly. I'll start a new thread in a bit.

I make decisions based on more abstract things like beta. If I can get a return thats competitive with the S&P (it doesn't have to beat it) by taking 20% less risk I'll take that all day long.

The only way to get return is to take risk. However, beta is not the only measure - you should consider the size and value premia as well.

I'll give you a surefire way to get s&p returns with less risk: Buy 80% s&p, 20% bond index. If you don't understand how an 80%eq/20% bond position can earn the same return as 100% equities (with less risk), you've got some reading to do.

Well, until Morningstar, Lipper, and others change their rating systems to reflect that

People place waaay too much value in rating services. Did you know that if you invest in M*-rated funds with 5 star ratings you are quite likely to underperform? Top rated funds are MORE likely than 3-star rated funds to underperform their peers in the following year. And yet, what do investors do? Pile money into the top funds, year after year. Star ratings are a great predictor of past performance!

There are trading costs in index funds too.

Absolutely. However, they are typically a fraction of active fund trading costs, and many index funds are structured in a manner to avoid frequent trading. One example is the buffer zone.. if a stock is at position 500 and falls to 501, the fund won't buy more, but needn't sell its holding in that stock either. So next year when it moves from 501 to 479 no large adjustments need be made.

[Art G]

Erd, I really think you are more interested in debating, than me giving you an actual answer. Go read my post again and note the word "either"., this implies you have a choice of two options.
As to the funds, I