Scott Burns answers financial advisor's Vanguard questions

[Nords]

Scott Burns helps financial advisors count to three.

If you're a financial advisor, no offense intended... but I wouldn't write to Scott Burns about it, either.

 

[JPatrick]

Over the years I seen some financial advisors take on Scott Burns and actually make some degree of sense. 
If this writer is trying to convince anyone that Vanguard isn't one of the better answers for investors he has failed big time.
In fact he has convinced me that he is perhaps the dimmest bulb on the low wattage tree.

 

[azanon]

If you're a financial advisor, no offense intended... but I wouldn't write to Scott Burns about it, either.

I don't mean any offense but anyone still working at 65 years old doesn't impress me either.   The pot makes fun of the kettle.

Scott Burns should be at the butt end of our jokes, and a prime example of the confused working slave masses.

 

[MJ]

If you are refering to Burns, perhaps he enjoys what he does and doesn't consider it work.

I don't see myself ever going back to work but if I found an interest I truly loved that could earn me easy money without too much pressure, I probably would do it. I wouldn't see it as work but as something to do with my free time.

MJ

 

[TromboneAl]

Scott Burns is doing the same thing we're doing here. He's just getting paid for it.

 

[Nords]

He's just getting paid for it.

I wonder how much his syndicated columns earn him per year.

Without the book tour, movie deals, public drug crisis/rehabilitation, and Playboy spread I bet there's not much left.

 

[WhodaThunkit]

Burns impresses me a lot. He enjoys what he does, and he's damn good at it, in my opinion. I don't always agree with him (mainly when I'm wrong )

 

[azanon]

"Use index funds cause they're cheaper, but perform equal or better to the average managed ones" is not exactly impressive advise.  Everyone's heard this before.

If i were forced to pick the average managed fund, i might take his advise!  Fortunately, I can specifically pick fund managers with proven track records of 10+ years.   Buying into guaranteed mediocrity is just not for me.

Of course index funds are cheap; a monkey could run one.

....

If his job is the most fun thing he can think of to do at 65, I pity him to be quite frank. How sad is it to have no/few hobbies. Pretty sad, i think.

 

[Jay_Gatsby]

"Use index funds cause they're cheaper, but perform equal or better to the average managed ones" is not exactly impressive advise.  Everyone's heard this before.

If i were forced to pick the average managed fund, i might take his advice!  Fortunately, I can specifically pick fund managers with proven track records of 10+ years.   Buying into guaranteed mediocrity is just not for me.

Of course index funds are cheap; a monkey could run one.

Agreed. All of the mutual funds I own are with very high quality fund families, and have returned extremely impressive numbers over time. One my funds, which I've owned for only 6 months, is up over 30% in that time, while others are at the 15%-20% level for the same period. I highly doubt that an average managed fund or an index fund could even come close to such numbers.

 

[azanon]

Exactly. They are definitely out there, and the top tier managers can pull off consistently higher returns year after year. The really good ones can sometimes beat the indexes by 3%+ multiple years, with very few slipups.

So, i dont bat an eye to pay that extra 0.8% expense ratio if the manager is worth it.

 

[Texas Proud]

Exactly.  They are definitely out there, and the top tier managers can pull off consistently higher returns year after year.   The really good ones can sometimes beat the indexes by 3%+ multiple years, with very few slipups.   

So, i dont bat an eye to pay that extra 0.8% expense ratio if the manager is worth it.

Azanon,

I am not saying you are not getting what you say, but research tends to say that it is more of a fluke that someone can beat the market consistantly by 3% a year without taking on more risks... no, I do not have the research in front of me and do not plan on looking it up... but it is out there... Very few people can beat the market consistently without risk...

It would be interesting to view some of the funds you have to look at their returns and their risks... let us know what they are...

 

[justin]

Agreed. All of the mutual funds I own are with very high quality fund families, and have returned extremely impressive numbers over time. One my funds, which I've owned for only 6 months, is up over 30% in that time, while others are at the 15%-20% level for the same period. I highly doubt that an average managed fund or an index fund could even come close to such numbers.

I own one. VPACX. Vanguard Pacific Stock Index Fund. I've been dumping all my taxable investments in there since June. It is up ~20% since then. You just have to know how to pick the right index funds. Exp ratio is 0.34% Vanguard has others.

 

[Sisyphus]

Justin,

I don't think 6 months is what most people consider enough "time." Just looking at the chart on Vanguard for VPACX, you can see its volatile... look at it from the 5 or 10 year perspective. Not picking on it, because some dollar cost averaging in there over the past decade would have worked wonders, but 6 months just isn't long enough to prove anything either way IMO.

Azanon,

If you are willing, please share any insights you have on managed funds that consistently outperform the market over a considerable period of time (5-10 years).

Thanks.

 

[justin]

Justin,

I don't think 6 months is what most people consider enough "time." Just looking at the chart on Vanguard for VPACX, you can see its volatile... look at it from the 5 or 10 year perspective. Not picking on it, because some dollar cost averaging in there over the past decade would have worked wonders, but 6 months just isn't long enough to prove anything either way IMO.

To paraphrase, Jay_Gatsby stated he highly doubted any index fund could touch the returns of his actively managed funds, specifically 15-20% over the last 6 months. I cited one that I own, and that I happened to pick 6 months ago. I cited the example to refute his belief that index funds couldn't perform that highly.

Whether 6 month returns mean anything is a different issue. Sisyphus, I tend to agree with you that 6 months of 20% returns (which is 44% on an annual basis, FYI) means almost nothing in the grand scheme of things. 19.5 years from now, that 20% growth will be a small blip on a 20 yr stock chart.

My success with VPACX was at least 90% luck (and the rest skill??). I just picked the poorest performing asset class at the time. Unfortunately, it went up a lot before I finished DCA'ing into it.

 

[wildcat]

People using a short time horizon will probably say indexing sucks. People using long time horizons will suggest otherwise.

I would only buy an actively managed fund if I could not get exposure to a specific asset class via index funds. If that isn't the case I will use index funds 100% of the time aside from a little mad money.

 

[justin]

Actively managed funds can be tempting. If the cost to go from index to active is only a few basis points, it may be worth it to risk those few basis points to go for active management. A clever manager could potentially make up those few basis points from their skill. I'm saying it is theoretically possible, and suggested by a number of pundits inclined towards index funds. The problem with active management is when the manager's skill has to outperform the mkt by 1-1.5% (plus any sales load) to cover their high exp. ratio.

 

[eridanus]

SCUTX did better then the S&P for many years. It then got blindsided...it's an example of survivorship bias.

http://finance.yahoo.com/q?s=scutx

In other words, everyone looks like a genius when the market is going up.

There are a few (very few) actively managed funds that have outperformed the S&P over the last 15 years. I don't recall what they are.


Edit: VPACX: http://finance.yahoo.com/q/bc?t=my&s=VPACX&l=on&z=m&q=l&c=&c=^GSPC

Edit #2: I'm not claiming that sector funds, if chosen wisely, can't perform better then the S&P in a certain period of time. I'm heavy overweighted in energy at the moment. Over time, however....

 

[Nords]

SCUTX

It's hard to believe that this ticker got past the marketing geniuses...

 

[Lancelot]

"Use index funds cause they're cheaper, but perform equal or better to the average managed ones" is not exactly impressive advise.  Everyone's heard this before.

If i were forced to pick the average managed fund, i might take his advise!  Fortunately, I can specifically pick fund managers with proven track records of 10+ years.   Buying into guaranteed mediocrity is just not for me.

Of course index funds are cheap; a monkey could run one.

Azanon, no offence meant but why not pick superior stocks and cut out the "middle man" of actively managed funds? Owning individual stocks also allows you to manage your capital gains (for tax purposes.)

I'm not that smart, so I pretty much stick to index funds and putz around with a few "hobby" stocks.

Lance

 

[justin]

Edit: VPACX: http://finance.yahoo.com/q/bc?t=my&s=VPACX&l=on&z=m&q=l&c=&c=^GSPC

Click on that link and pick the 3 month, 6 mo, 1 yr, 2 yr or 5 yr comparison charts for SP500 vs. VPACX and see how they compare. VPACX blows it out of the water over 5 years or less. There! I can pick a convenient time period to support my position too!

(btw - I'd never sink all my portfolio into VPACX, just a good international diversifier for a small % of the total portfolio).