"Winning Lazy Portfolios Using Fidelity Funds

Achiever51 · 02-05-2008, 10:23 PM

Came across this article this evening and thought it was an interesting balance to the Vanguard vs. Fidelity discussions:

At last! Winning 'Lazy Portfolios' using Fidelity funds - MarketWatch

from the article:
For decades Fidelity left the no-load indexing business to Vanguard and built its reputation on actively managed funds. But in recent years Fidelity has dropped some loads and added some index funds in a challenge to Vanguard.

So several weeks ago I asked financial adviser Paul Merriman (his "FundAdvice Ultimate Buy & Hold" is one of "Lazy Portfolios" we track regularly) about creating Fidelity "Lazy Portfolios" and comparing their performance with the Vanguard ones we've been tracking, using Fidelity funds that track similar indexes. We also got help from the folks at Fidelity.

Here's the comparison: As it turns out, Fidelity's selection of index funds is still quite limited. Nevertheless, three of the smaller "Lazy Portfolios" (Dr. Bernstein's "Smart Money," Scott Burns "Margaritaville" and Kevin Roth's "Second-Grader's Starter") offered great head-to-head comparisons. Since all the funds in both versions track similar indexes, I didn't expect much difference in performance, I just wanted to give Fidelity's 19 million investors a new "Lazy Portfolio" strategy. ...
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Art G · 02-05-2008, 10:39 PM

Every year, after the fact, Scott Burns does an article stating his "couch potato" formula you should have used. Unfortunately, it's usually not the same one he recommended at the beginning of the year. Personally, I think it's a terrible way to invest. Imagine if you did your job stating, "my only goal is to make money while doing as little as possible". How successful would you be?

audreyh1 · 02-06-2008, 12:09 PM

Quote:

Originally Posted by Art G

Personally, I think it's a terrible way to invest. Imagine if you did your job stating, "my only goal is to make money while doing as little as possible". How successful would you be?

LOL! But that is precisely my goal when it comes to investing!

I think it's been shown pretty well that simple approaches do just as well as more complex ones, and in fact sometimes outperform them significantly.

The more an individual messes with their investments, the more they are tempted to tweak and time things and deviate from their initial (hopefully sound) investment strategy. It's been pretty well established that individuals way underperform the mutual funds they own because they are usually bailing at the wrong time and buying at the wrong time.

Audrey

dex · 02-06-2008, 12:25 PM

Quote:

Originally Posted by Art G

Personally, I think it's a terrible way to invest. Imagine if you did your job stating, "my only goal is to make money while doing as little as possible". How successful would you be?

If working hard and hardly working (doing as little as possible) produces the same amount of money; why would you want to work hard?

Marquette · 02-06-2008, 12:44 PM

Quote:

Originally Posted by Art G

Imagine if you did your job stating, "my only goal is to make money while doing as little as possible". How successful would you be?

That's how I live my life. It's the slacker's creed. So far, so good.

**REWahoo** · 02-06-2008, 01:05 PM

Quote:

Originally Posted by Art G

Imagine if you did your job stating, "my only goal is to make money while doing as little as possible". How successful would you be?

It's been reasonably successful for me, at least so far.

I hope to improve my success rate by working harder at doing even less.

Dawg54 · 02-06-2008, 01:26 PM

A 'lazy portfolio' is perfect for a full time golf bum. Make money while I chase the golf ball around the course.

Of course lately, just trying not to lose money.

Art G · 02-06-2008, 02:07 PM

Quote:

Originally Posted by dex

If working hard and hardly working (doing as little as possible) produces the same amount of money; why would you want to work hard?

LOL! OK, I'll answer just one of these. Because "hardly working" doesn't produce the same results. I don't want average results, or in the case of buying index funds, guaranteed below average results. I'd rather take control and make every effort to influence my returns. I guess if you're prone to panic, then perhaps this is the best method for you, but then why post on this site?
If I won't even change the oil in my car, how can I justify trying to go the simplest method with my money?
BTW, where Scott Burns is involved, each year he gives his results, but then adds the caveat, "but if you had just added this fund to it you would have...."...well that's real helpful AFTER the fact! So now, his couch potato method includes seven different funds? That's an awfully big couch! JMO

Marquette · 02-06-2008, 02:14 PM

Hey Art, ever been to diehards.org?

And, how does an index fund assure below average results? That's just silly.

Achiever51 · 02-06-2008, 02:14 PM

Uhhhhh, just for clarification, I really didn't mean to start a Scott Burns discussion with this post....I just thought it was an interesting option for the folks on the board who might lean to Fidelity rather than VG.

And now I'll go back to my own couch.

Carry on....

Art G · 02-06-2008, 02:20 PM

Quote:

Originally Posted by Marquette

Hey Art, ever been to diehards.org?

And, how does an index fund assure below average results? That's just silly.

Well Marquette, you take an index fund, which by definition has to hold the 500 stocks within the S&P 500, and you add in an expense ratio, and voila', you are GUARANTEED a return less than the S&P 500.
What is diehards.org?

Art G · 02-06-2008, 02:21 PM

Quote:

Originally Posted by Achiever51

Uhhhhh, just for clarification, I really didn't mean to start a Scott Burns discussion with this post....I just thought it was an interesting option for the folks on the board who might lean to Fidelity rather than VG.

And now I'll go back to my own couch.

Carry on....

Sorry, he's one of my pet peeves.

Achiever51 · 02-06-2008, 02:34 PM

I kinda figured that out from your posts.

Not one of my favs either, but hey, different strokes for different folks.

unclemick · 02-06-2008, 02:38 PM

Quote:

Originally Posted by Art G

Sorry, he's one of my pet peeves.

Same for Fidelity here - most of the nouns and adjectives, not to mention the math used by me to refer to Fidelity, the Johnsons, and such would get me banned in Boston, here and possibly thrown out of the old doughnut shop, my favorite bar and would not be accepted as a written paper.

Farrell ocasionally hits the nail on the head - a few bars of 'I Saw the Light' might be approriate. Better late than never - especially their attempts to low ball expense ratio. Tracking error is another discussion.

heh heh heh - yeah yeah I've owned Fidelity in the distant past - before I saw the light. Plus my hormones used to like Peter Lynch - One Up on Wall Street - before I stopped reading books!

megacorp-firee · 02-07-2008, 04:04 AM

Quote:

Originally Posted by audreyh1

LOL! But that is precisely my goal when it comes to investing!

I think it's been shown pretty well that simple approaches do just as well as more complex ones, and in fact sometimes outperform them significantly.

The more an individual messes with their investments, the more they are tempted to tweak and time things and deviate from their initial (hopefully sound) investment strategy. It's been pretty well established that individuals way underperform the mutual funds they own because they are usually bailing at the wrong time and buying at the wrong time.

Audrey

Totally agree with you Audrey. I forget what the measurement is called, but essentially it's the 'real' parallel measurement of the total years performance of a fund. It is the effective rate that most investors achieve and is lower than the total years performance. One of the reasons it is lower is that people have a tendency to 'tinker' with their investments and try and time the market, i.e. they are not in for the total period.

tightasadrum · 02-07-2008, 06:58 AM

I have a perfect example of why a "lazy portfolio," i.e. SP500 or total market index fund, might be best for most individual investors if they're in the market at all.

A guy I work with, (now two days a week

), who is around 66 and not a wealthy guy, but has a nest egg he invests with one of the brokerage firms. At lunch a couple of weeks ago he told me he just sold out of stocks and got all his money into cash. He said I couldn't stand losing so much money. (This was AFTER the market had really tanked.) Then in the next sentence, (believe me, I'm not making this up), he said, "...maybe when the market goes back up again, I'll get back into stocks."

After I cranked my jaw back up I told him that it sounded like he had a great plan for buying high and selling low. Funny thing was, he just looked at me like he didn't have a clue what I was talking about. I just changed the subject.

dex · 02-07-2008, 07:15 AM

Quote:

Originally Posted by tightasadrum

At lunch a couple of weeks ago he told me he just sold out of stocks and got all his money into cash. He said I couldn't stand losing so much money. (This was AFTER the market had really tanked.) Then in the next sentence, (believe me, I'm not making this up), he said, "...maybe when the market goes back up again, I'll get back into stocks."

What I do is only update my portfolio every two weeks or so and only on a up day.

I'm still averaging into the market - should be completed by the end of the year.
I'm still holding back on beginning to invest in the emerging markets fund and will continue to add to the commodities fund in the summer or so.

myself · 02-07-2008, 08:10 AM

I have money in a Fidelity account. However I don't have any in their funds.
I managed to get over 24% last year, but I lost about 6.8-6.9% in Jan. Well, I can be pretty happy with that, since the DOW is (at last check) DOWN 14% since I started self managing my stock picks.

Dawg54 · 02-07-2008, 08:30 AM

Quote:

Originally Posted by tightasadrum

A guy I work with, (now two days a week

), who is around 66 and not a wealthy guy, but has a nest egg he invests with one of the brokerage firms. At lunch a couple of weeks ago he told me he just sold out of stocks and got all his money into cash. He said I couldn't stand losing so much money. (This was AFTER the market had really tanked.) Then in the next sentence, (believe me, I'm not making this up), he said, "...maybe when the market goes back up again, I'll get back into stocks."

I have one of those friends too. He dropped by my house the other day and asked 'how can I keep from losing so much money in the stock market?' I told him I was trying to figure that one out as well.

Art G · 02-07-2008, 08:49 AM

Not to debate the majority here, but what about the other side? Technically speaking, back in October the market started giving signs of weakness, then in the week of January 4th, the market broke through the support line for the first time since July '06. Currently, the next support line is at 11,944. What we've been seeing is a correction thus far in the market, but certainly one that could be managed. It is possible to trade the market without emotion.
Wouldn't you all rather avoid 1000 pts. dips if possible?

02-05-2008, 10:23 PM	#1
Achiever51 Full time employment: Posting here. Join Date: Feb 2007 Location: Southeastern Michigan Posts: 806	"Winning Lazy Portfolios Using Fidelity Funds Came across this article this evening and thought it was an interesting balance to the Vanguard vs. Fidelity discussions: At last! Winning 'Lazy Portfolios' using Fidelity funds - MarketWatch from the article: For decades Fidelity left the no-load indexing business to Vanguard and built its reputation on actively managed funds. But in recent years Fidelity has dropped some loads and added some index funds in a challenge to Vanguard. So several weeks ago I asked financial adviser Paul Merriman (his "FundAdvice Ultimate Buy & Hold" is one of "Lazy Portfolios" we track regularly) about creating Fidelity "Lazy Portfolios" and comparing their performance with the Vanguard ones we've been tracking, using Fidelity funds that track similar indexes. We also got help from the folks at Fidelity. Here's the comparison: As it turns out, Fidelity's selection of index funds is still quite limited. Nevertheless, three of the smaller "Lazy Portfolios" (Dr. Bernstein's "Smart Money," Scott Burns "Margaritaville" and Kevin Roth's "Second-Grader's Starter") offered great head-to-head comparisons. Since all the funds in both versions track similar indexes, I didn't expect much difference in performance, I just wanted to give Fidelity's 19 million investors a new "Lazy Portfolio" strategy. ... . __________________ The best things in life....are not things.

02-06-2008, 01:26 PM	#7
Dawg54 Thinks s/he gets paid by the post Join Date: Feb 2005 Location: Mississippi Posts: 3,335	A 'lazy portfolio' is perfect for a full time golf bum. Make money while I chase the golf ball around the course. Of course lately, just trying not to lose money. __________________ Full time golf bum.......

02-06-2008, 02:14 PM	#10
Achiever51 Full time employment: Posting here. Join Date: Feb 2007 Location: Southeastern Michigan Posts: 806	Uhhhhh, just for clarification, I really didn't mean to start a Scott Burns discussion with this post....I just thought it was an interesting option for the folks on the board who might lean to Fidelity rather than VG. And now I'll go back to my own couch. Carry on.... __________________ The best things in life....are not things.

02-06-2008, 02:34 PM	#13
Achiever51 Full time employment: Posting here. Join Date: Feb 2007 Location: Southeastern Michigan Posts: 806	I kinda figured that out from your posts. Not one of my favs either, but hey, different strokes for different folks. __________________ The best things in life....are not things.

02-07-2008, 06:58 AM	#16
tightasadrum Full time employment: Posting here. Join Date: Aug 2006 Location: athens Posts: 512	I have a perfect example of why a "lazy portfolio," i.e. SP500 or total market index fund, might be best for most individual investors if they're in the market at all. A guy I work with, (now two days a week), who is around 66 and not a wealthy guy, but has a nest egg he invests with one of the brokerage firms. At lunch a couple of weeks ago he told me he just sold out of stocks and got all his money into cash. He said I couldn't stand losing so much money. (This was AFTER the market had really tanked.) Then in the next sentence, (believe me, I'm not making this up), he said, "...maybe when the market goes back up again, I'll get back into stocks." After I cranked my jaw back up I told him that it sounded like he had a great plan for buying high and selling low. Funny thing was, he just looked at me like he didn't have a clue what I was talking about. I just changed the subject. __________________ Can't you see yourself in the nursing home saying, " Darn! Wish I'd spent more time at the office instead of wasting time with family and friends."

02-05-2008, 10:39 PM	#2
Art G Thinks s/he gets paid by the post Join Date: Nov 2007 Posts: 1,052	Every year, after the fact, Scott Burns does an article stating his "couch potato" formula you should have used. Unfortunately, it's usually not the same one he recommended at the beginning of the year. Personally, I think it's a terrible way to invest. Imagine if you did your job stating, "my only goal is to make money while doing as little as possible". How successful would you be?

02-06-2008, 02:14 PM	#9
Marquette Thinks s/he gets paid by the post Join Date: Jan 2008 Posts: 2,020	Hey Art, ever been to diehards.org? And, how does an index fund assure below average results? That's just silly.

02-07-2008, 08:10 AM	#18
myself Recycles dryer sheets Join Date: Jan 2008 Posts: 185	I have money in a Fidelity account. However I don't have any in their funds. I managed to get over 24% last year, but I lost about 6.8-6.9% in Jan. Well, I can be pretty happy with that, since the DOW is (at last check) DOWN 14% since I started self managing my stock picks. __________________ Primary title "chief moron"

02-07-2008, 08:49 AM	#20
Art G Thinks s/he gets paid by the post Join Date: Nov 2007 Posts: 1,052	Not to debate the majority here, but what about the other side? Technically speaking, back in October the market started giving signs of weakness, then in the week of January 4th, the market broke through the support line for the first time since July '06. Currently, the next support line is at 11,944. What we've been seeing is a correction thus far in the market, but certainly one that could be managed. It is possible to trade the market without emotion. Wouldn't you all rather avoid 1000 pts. dips if possible?
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