Some Active beats Indexing

[ERD50]

Quote:

Originally Posted by Gone4Good ... That surprised me too. But if you look at Wellesley's portfolio mix, the bond portion is intermediate corporates. If you add Vangaurd's int-corp index to the graph, the relative performance makes a bit more sense. Corp bonds have done really well over the past 15 years. Much better than I would have thought. But still, there are periods where a 60% holding of corp's seemed like it should have held them back more than they did. So, yeah, it looks like the guys and gals at Wellesley are earning their paychecks.

Yep. And for a little more 'fun' with that chart, I realized just recently that if you adjust the bar for a time frame less than "ALL" (1 year, 2 years, whatever), you can then grab the bar in the middle and slide it left-right, and see how X year performance was across the entire span.

Quote:

Originally Posted by Mulligan Thanks for posting that. I was reading the above 3M reference and thinking I knew somebody owned Palm but it wasnt them. ....

It took me a minute, but 3Com was based here and I knew people who worked there, and at its earlier incarnation - that was US Robotics (of modem fame).

-ERD50

[Mulligan]

Quote:

Originally Posted by ERD50 Yep. And for a little more 'fun' with that chart, I realized just recently that if you adjust the bar for a time frame less than "ALL" (1 year, 2 years, whatever), you can then grab the bar in the middle and slide it left-right, and see how X year performance was across the entire span. It took me a minute, but 3Com was based here and I knew people who worked there, and at its earlier incarnation - that was US Robotics (of modem fame). -ERD50

US Robotics, I havent heard that name in a while....If we keep this up we will eventually be heading toward mentioning Wang Class B shares of stock!

[Gone4Good]

Quote:

Originally Posted by NW-Bound The parent company was 3Com, not 3M. I owned 3Com during that time, and watched in amazement the Palm mania.

Yup. Memory fades, I guess.

[NW-Bound]

It's OK. It happens to all of us, some sooner than others.

Anyway, I would love to know to be a contrarian like Templeton. He made mucho money, and also acted as a stabilizing actor in the market with "helping" other investors: selling when they clamor to buy, buy, buy, and buying when they are desperate to get out at any price. Without contrarians, the market swings would be even more severe.

[frayne]

We all know the cliche, how do you make a small fortune in actively managed funds ? Start with a large one.

[dallas27]

Quote:

Originally Posted by youbet Which single benchmark do you have 100% of your investments in? Are you in, say, 100% S&P 500 so that you can be "guaranteed" at being the benchmark itself?

A benchmark is whatever you dream up. Active investing try call winners as subsets.

I allocate across 5 indexes.


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[OrcasIslandBound]

I am mostly in index funds now, but I still have a few managed funds. I have to keep an eye on them and if one of their managers quits, I move that investment into an index. If I miss this detail I'll move the investment to an index when it does poorly.

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[Fedup]

Does BRK/b beat index fund?


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[youbet]

Quote:

Originally Posted by Fedup Does BRK/b beats index fund? Sent from my iPad using Early Retirement Forum

BRK/b outperforms many index funds in given time frames. Lately, the dozens of index funds following energy, commodities, almost any international index or domestic small cap index come to mind. Going forward, it's a good guess that BRK/b will beat some of 'em and not others, depending which of the dozens and dozens of indexes and corresponding index funds you're talking about.

If you like the idea of not having taxable divs thrust upon you every year and impacting your tax picture, some folks find BRK/b a reasonable substitute for a dom TSM index fund such as VTI. There is no guarantee that it will stay that way of course.

[Fedup]

May be I should be specific, the s&p 500 index, I've heard on the news that his funds have not being doing well lately.


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[youbet]

Quote:

Originally Posted by Fedup Mane I should be specific, the s&p 500 index, I've heard on the news that his funds have not being doing well lately. Sent from my iPad using Early Retirement Forum

Oh, OK.

BRK/b generally outperformed the S&P 500 index over the past five years. Here's a nice tool to play with and that answers the question.

Berkshire vs. the S&P 500 | Thumbcharts®


BRK/b did have a down 2015, but still ended the five year period ahead of the S&P500 and BRK/b holders had the opportunity to sell at a nice margin over the S&P 500 along the way. How things will work out over the next few years would just be a guess.

I couldn't decide and own some of both (but predominantly TSM)...... There was a nice buying opportunity for BRK/b in January at about $125 and I couldn't resist. We'll see how it works out.

[papadad111]

Stock pickers just had their worst quarter ever

http://www.cnbc.com/id/103518291

Much of the past decade has been rough for active fund managers, but 2016 hasn't been just bad, it's been history-making bad.

Fewer than 1 in 5 large-cap funds beat the S&P 500, the lowest level since at least 1998,

For growth-focused funds, the news was even uglier: Just a 6 percent beat rate at a time when the S&P benchmark has gained just over 1 percent year to date.

Value managers did a bit better with a 19.6 percent beat rate,

core funds fared comparatively well, with 29 percent topping the benchmark.

[Gone4Good]

Quote:

Originally Posted by youbet BRK/b generally outperformed the S&P 500 index over the past five years. Here's a nice tool to play with and that answers the question. Berkshire vs. the S&P 500 | Thumbcharts®

That chart doesn't look like it includes dividends. And that's a huge illusory advantage for non-dividend paying companies like Berkshire.

Total returns for Vanguard's 500 Index are 73% over the last five years instead of about 50% shown in the chart. BRK looks like it's up about 60% over 5 years, so trailing the S&P 500 total return.

[NW-Bound]

Yes, one should be sure to include dividends when comparing stocks.

According to Morningstar, a $10K invested 5 years ago would grow to $17,130 in VFINX (Vanguard flagship S&P MF), and $17,253 in BRK. So they run neck-to-neck the last 5 years.

Over longer terms, Buffett leads big. Morningstar only shows data going back to 8/31/1991, so I took that as the start.

A $10K invested on 8/31/1991 grew to $35K 10 years later (8/31/2001) with S&P and $79K with BRK. It's a factor of 2.26X. This is the period of the tech bubble, and Buffett beat it. Amazing!

Keep the investments for another 10 years, and it became $45K in 2011 with the S&P, and $125K with BRK. The factor has widened to 2.78X.

Keep it till now (4/2016), and it's $84K with the S&P and $245K with BRK. The factor is now 2.91X.

If we can go back further than 1991, BRK would shine even more when it was smaller and Buffett could make more agile moves, and beat the pants off the S&P. From Wikipedia:

Quote:

Berkshire Hathaway averaged an annual growth in book value of 19.7% to its shareholders for the last 49 years (compared to 9.8% from the S&P 500 with dividends included for the same period), while employing large amounts of capital, and minimal debt.

That's a return of 2X better, and compounding over 50 years? Oh la la.

But, as I often repeatedly said, no one can beat the S&P every single year. Stand back to look over a bit longer period and you will see the difference.

[NW-Bound]

I think I have just convinced myself to put all my current cash holding in BRK if the market crashes tomorrow. If any stock could recover from Armageddon, BRK would be leading them.

But until then, I can use my cash to write more puts on BRK. If the market does not crash, that still gives me a bit of return if the option does not get assigned. And if it gets assigned, that will do me good in the long run.

[Running_Man]

TLT has outperformed BRK since Oct 2008

[youbet]

Quote:

Originally Posted by NW-Bound Yes, one should be sure to include dividends when comparing stocks. According to Morningstar, a $10K invested 5 years ago would grow to $17,130 in VFINX (Vanguard flagship S&P MF), and $17,253 in BRK. So they run neck-to-neck the last 5 years.

Yes. To clear up any confusion (particularly what things "look like" to G4G ) I grabbed this chart from Schwab. Orange = S&P 500 with divs reinvested. Blue = BRK/B. Y axis = growth of $10k. Data as of 01April16. As you said, it appears BRK/B ran neck and neck with the S&P 500 the past five years.

Thanks for the additional info. Yes, Warren has quite the historical record.

Total Return BRK/B

• 1 Year
  -1.4%
• 3 Year
  +36.1%
• 5 Year
  +72.8%

Quote:

The Total Return is the rate of return representing the price appreciation of a stock with cash dividends reinvested on the ex-date for the most recent 1, 3 and 5 fiscal years. This growth of $10,000 graph represents the growth of a hypothetical investment of $10,000. It assumes reinvestment of dividends on ex-date.

[youbet]

Quote:

Originally Posted by Gone4Good That chart doesn't look like it includes dividends. And that's a huge illusory advantage for non-dividend paying companies like Berkshire. Total returns for Vanguard's 500 Index are 73% over the last five years instead of about 50% shown in the chart. BRK looks like it's up about 60% over 5 years, so trailing the S&P 500 total return.

Good catch. Indeed the "Thumbcharts" chart does not include reinvested divs for the S&P500. My bad.

It looks like Thumbcharts did get the BRK/B line OK though. You eyeballed it at about 60% but when I literally held a scale to my computer screen, it does look more like 70%. And it turns out the 5 yr return as of April 1st was 72.8%.

[NW-Bound]

I just saw an article about the performance of Yale endowment fund. See chart below.

Not all the growth came from investment returns, as it includes new donations. However, I doubt that the fresh money amounts to much in later years when the fund got so large.

Look how little the fund dropped during the recession of 2002-2003 and the Great Recession of 2008-2009, compared to the S&P. However, it has not grown as strong in the last few years.

[garyt]

I posted this on another thread, but active fund managers are handicapped by the very people who invest in them. I see it all the time at work. When the market goes down, people panic and shift out of stocks. When the market skyrockets, they go all in. They're basically forcing the managers to sell low and buy high.