Portfolio & Morningstar

[Bflotomny]

I had been with Vanguard until recently. I'm currently with Fidelity. My inquire today is simple. I'm looking at several different funds in and out of Fidelity. How much weight do you put on Morningstar ratings in your selection of Mutual Funds.

 

[mathjak107]

zero…

they go by the past .

not how the fund fits in today or who is now managing that fund

 

[audreyh1]

I switched to index funds so Morningstar ratings don’t matter anymore.

Whatever the rating avoid mutual funds with moderate or high expense ratios. Plenty of good funds with quite low expense ratios - focus on those.

 

[mathjak107]

any funds i use that are not etfs are fidelity funds .

for that i use fidelity insight , the news letter ..they stay on top of what goes on with the funds on fidelity better then anyone else

 

[MikeTN]

Comment that they go by the past is wrong, they do look at the current managers and fund family.
I find their ratings useful, why not start looking at the gold and silver rated funds in the category that interests you.
however, don't make the mistake of buying a fund just because it is Gold rated. For example, PFF is Gold rated, and they explain why... but is is a Preferred stock fund. Is that what you want?
I have found them useful, but usually also consult Portfolio visualizer if I already have a similar fund. Did the one recommended by M* outperform my current fund? Not always.

 

[Montecfo]

Morningstar is useful. The analysis is best. But look at performance percentile compared to peers.

 

[OldShooter]

Morningstar is useful. The analysis is best. But look at performance percentile compared to peers.

I disagree. If peers are other stock picking funds they will in aggregate be losers. Compare only to indexes or to index funds.

 

[Koolau]

I had been with Vanguard until recently. I'm currently with Fidelity. My inquire today is simple. I'm looking at several different funds in and out of Fidelity. How much weight do you put on Morningstar ratings in your selection of Mutual Funds.

I never look at Mornigstar. For almost all my investing in markets, I use index investing and shoot for extremely low cost.

 

[mathjak107]

Morningstar is useful. The analysis is best. But look at performance percentile compared to peers.

while i don’t agree with that , morningstar did find that if one stuck to the top 20% of funds with the most investor dollars in them , the odds of beating indexing jumped to 80%

 

[mathjak107]

I never look at Mornigstar. For almost all my investing in markets, I use index investing and shoot for extremely low cost.

costs certainly may be a factor but they can be largely over blown .

there are so many parameters involved that are so much more outcome determining, like portfolio construction and the day you bought and the day you sold .

i am playing around with a relatively small amount of money in a experimental portfolio i am trying .

its supposed to provide the returns of a 60/40 but with less risk and draw down .

it uses expensive 3x funds .


just went as far back with these funds as i could in portfolio visualizer. first time running it myself .

i was able to go back to jan 2020 , so almost 4 years , so i captured the covid equity drop and the hammering of bonds .

a 60/40 consisting of 60% voo (s&p fund )and 40% bnd ( total bond fund ) took 100k and turned it in to 126,130 , a cagr of 6.11%

the 60/40 carolina reaper took a 100k grew it to 136,260 ,a cagr of 8.22%

BUT GET THIS

WORST DOWN YEAR WAS MINUS 2.57% for the reaper with a worst draw down of 9.45%

the conventional 60/40 had a worst year of minus 16.16 % and a worst draw down of 20.15%

HOLY CRAP , WHAT A DIFFERENCE .

Boy this is showing a lot of promise as we went thru some awful times as well as high inflation and rising rates.

it really wants to compel one to go whole hog but i don’t have the balls yet. lol

but it certainly looked like that magical portfolio we all dream about if we don’t want 100% equities

i mean down a mere 2.57% …that’s incredible while a 60/40 was down 16.16% , yet beat it by over 2% in gains

keep in mind these returns include all expenses and these leveraged funds are not anywhere near as cheap as voo or bnd .

so like i always say , there is so much more when portfolios are involved then lowest costs of the individual components

that was vanguard marketing brainwashing investors.

here are the expenses

dbmf .85% , upro .92 tyd 1.1%

voo .03. bnd .03

yet including all expenses the reaper not only averaged more then 2% a year more but was lower risk in every respect despite much higher fees and the individual holdings being as volatile as can be .

yet how often here is the advice to buy low cost index funds as the primary criteria or only criteria … so marketing vs real life can be very different when all parameters are considered

 

[mathjak107]

costs certainly may be a factor but they can be largely over blown .

there are so many parameters involved that are so much more outcome determining, like portfolio construction and the day you bought and the day you sold .

i am playing around with a relatively small amount of money in a experimental portfolio i am trying .

its supposed to provide the returns of a 60/40 but with less risk and draw down .

it uses expensive 3x funds .


just went as far back with these funds as i could in portfolio visualizer. first time running it myself .

i was able to go back to jan 2020 , so almost 4 years , so i captured the covid equity drop and the hammering of bonds .

a 60/40 consisting of 60% voo (s&p fund )and 40% bnd ( total bond fund ) took 100k and turned it in to 126,130 , a cagr of 6.11%

the 60/40 carolina reaper took a 100k grew it to 136,260 ,a cagr of 8.22%

BUT GET THIS

WORST DOWN YEAR WAS MINUS 2.57% for the reaper with a worst draw down of 9.45%

the conventional 60/40 had a worst year of minus 16.16 % and a worst draw down of 20.15%

HOLY CRAP , WHAT A DIFFERENCE .

Boy this is showing a lot of promise as we went thru some awful times as well as high inflation and rising rates.

it really wants to compel one to go whole hog but i don’t have the balls yet. lol

but it certainly looked like that magical portfolio we all dream about if we don’t want 100% equities

i mean down a mere 2.57% …that’s incredible while a 60/40 was down 16.16% , yet beat it by over 2% in gains

keep in mind these returns include all expenses and these leveraged funds are not anywhere near as cheap as voo or bnd .

so like i always say , there is so much more when portfolios are involved then lowest costs of the individual components

that was vanguard marketing brainwashing investors.

here are the expenses

dbmf .85% , upro .92 tyd 1.1%

voo .03. bnd .03

yet including all expenses the reaper not only averaged more then 2% a year more but was lower risk in every respect despite much higher fees and the individual holdings being as volatile as can be .

yet how often here is the advice to buy low cost index funds as the primary criteria or only criteria … so marketing vs real life can be very different when all parameters are considered

this reminds me of the boglehead who went to buy a car .

he beat up the salesman for the lowest price , then he went to work on the finance guy getting lower financing , then he traded in his car and worked on getting a higher price for it .


on the other hand , grandma got the same car . she paid a bit higher and got a slightly higher financing rate .

grandma sold her car privately instead of wholesale .

grandma won and ended up with the best deal.

the point is don’t get to hung up on fees , they are only one of many parameters that effect an outcome.

no ones outcome is the best of everything so something not the best in one parameter can easily be made up in another one , or negated by another factor

 

[target2019]

I had been with Vanguard until recently. I'm currently with Fidelity. My inquire today is simple. I'm looking at several different funds in and out of Fidelity. How much weight do you put on Morningstar ratings in your selection of Mutual Funds.

Morningstar is a good site for research. It's not the only one. The stars are a rank, and just mean one fund ranks higher than another. That's nice to know, but many investors go a bit further in the analysis.

Stars are probably ok for sifting through many fund candidates. It's hard to ignore the stars.

Vanguard Wellesley gets 5 stars. Does it fit every space in your portfolio?

 

[VanWinkle]

this reminds me of the boglehead who went to buy a car .

he beat up the salesman for the lowest price , then he went to work on the finance guy getting lower financing , then he traded in his car and worked on getting a higher price for it .


on the other hand , grandma got the same car . she paid a bit higher and got a slightly higher financing rate .

grandma sold her car privately instead of wholesale .

grandma won and ended up with the best deal.


the point is don’t get to hung up on fees , they are only one of many parameters that effect an outcome.

no ones outcome is the best of everything so something not the best in one parameter can easily be made up in another one , or negated by another factor

And don't believe everything you read on the internet......

 

[jimbee]

this reminds me of the boglehead who went to buy a car .

he beat up the salesman for the lowest price , then he went to work on the finance guy getting lower financing , then he traded in his car and worked on getting a higher price for it .


on the other hand , grandma got the same car . she paid a bit higher and got a slightly higher financing rate .

grandma sold her car privately instead of wholesale .

grandma won and ended up with the best deal.

the point is don’t get to hung up on fees , they are only one of many parameters that effect an outcome.

no ones outcome is the best of everything so something not the best in one parameter can easily be made up in another one , or negated by another factor

Interesting anecdote, that has nothing to do with fund fees.
https://en.wikipedia.org/wiki/False_equivalence

 

[mathjak107]

And don't believe everything you read on the internet......

you mean things aren’t true on the internet ?

 

[bltkmt]

And don't believe everything you read on the internet......

But, I read this on the internet!

 

[VanWinkle]

But, I read this on the internet!

 

[OldShooter]

Morningstar is a good site for research. It's not the only one. The stars are a rank, and just mean one fund ranks higher than another. That's nice to know, but many investors go a bit further in the analysis.

Stars are probably ok for sifting through many fund candidates. It's hard to ignore the stars.

Vanguard Wellesley gets 5 stars. Does it fit every space in your portfolio?

To clarify:

Stars are given based on a fund's historical performance relative to its industry group peers. IIRC, the top 10% of risk adjusted performers get five stars, the bottom get 1 star. Multiple studies have shown that the star ratings are not predictive and Morningstar has agreed with this result. (https://www.investopedia.com/articl...gstars-best-mutual-funds-really-best-morn.asp) (https://www.morningstar.com/etfs/morningstar-rating-funds-what-know)

Worse, the performance of the industry groups as a whole is not considered. So the worst performing industry group and the the best performing group will both have 10% of funds rated five stars.

A few years ago Morningstar reacted to the failure of the star system by coming up with a predictive scoring system of some kind. I have never bothered to look at it and it will take passage of time to say whether it is any better at stock-picking than the majority of failed stock-pickers (per S&P SPIVA and Manager Persistence reports). It is not obvious to me, however, that a firm skilled in data compilation will have any special skills at stock-picking. Everyone has the same data.

 

[Koolau]

costs certainly may be a factor but they can be largely over blown .

there are so many parameters involved that are so much more outcome determining, like portfolio construction and the day you bought and the day you sold .

i am playing around with a relatively small amount of money in a experimental portfolio i am trying .

its supposed to provide the returns of a 60/40 but with less risk and draw down .

it uses expensive 3x funds .


just went as far back with these funds as i could in portfolio visualizer. first time running it myself .

i was able to go back to jan 2020 , so almost 4 years , so i captured the covid equity drop and the hammering of bonds .

a 60/40 consisting of 60% voo (s&p fund )and 40% bnd ( total bond fund ) took 100k and turned it in to 126,130 , a cagr of 6.11%

the 60/40 carolina reaper took a 100k grew it to 136,260 ,a cagr of 8.22%

BUT GET THIS

WORST DOWN YEAR WAS MINUS 2.57% for the reaper with a worst draw down of 9.45%

the conventional 60/40 had a worst year of minus 16.16 % and a worst draw down of 20.15%

HOLY CRAP , WHAT A DIFFERENCE .

Boy this is showing a lot of promise as we went thru some awful times as well as high inflation and rising rates.

it really wants to compel one to go whole hog but i don’t have the balls yet. lol

but it certainly looked like that magical portfolio we all dream about if we don’t want 100% equities

i mean down a mere 2.57% …that’s incredible while a 60/40 was down 16.16% , yet beat it by over 2% in gains

keep in mind these returns include all expenses and these leveraged funds are not anywhere near as cheap as voo or bnd .

so like i always say , there is so much more when portfolios are involved then lowest costs of the individual components

that was vanguard marketing brainwashing investors.

here are the expenses

dbmf .85% , upro .92 tyd 1.1%

voo .03. bnd .03

yet including all expenses the reaper not only averaged more then 2% a year more but was lower risk in every respect despite much higher fees and the individual holdings being as volatile as can be .

yet how often here is the advice to buy low cost index funds as the primary criteria or only criteria … so marketing vs real life can be very different when all parameters are considered

I'm sure I've left money on the table with my index investing BUT I haven't left much money in the fund managers' pockets. I pretty much put everything on auto pilot except for occasional re-balancing. Totally lazy about such things, I guess.

 

[Koolau]

this reminds me of the boglehead who went to buy a car .

he beat up the salesman for the lowest price , then he went to work on the finance guy getting lower financing , then he traded in his car and worked on getting a higher price for it .


on the other hand , grandma got the same car . she paid a bit higher and got a slightly higher financing rate .

grandma sold her car privately instead of wholesale .

grandma won and ended up with the best deal.

the point is don’t get to hung up on fees , they are only one of many parameters that effect an outcome.

no ones outcome is the best of everything so something not the best in one parameter can easily be made up in another one , or negated by another factor

I'm sure you're right about fees. Having said that, I don't feel qualified to "pick" managed funds, so the least I can do is get low fees. W*rks for me though I'm sure there is a better way.

 

[Koolau]

And don't believe everything you read on the internet......

Yeah, I'm cutting back on my believing the internet. Now I only belief half of what I see and none of what I hear.

 

[Montecfo]

I disagree. If peers are other stock picking funds they will in aggregate be losers. Compare only to indexes or to index funds.

Oh boy. Good luck with that.

Fortunately I only invest for my own accounts, not "in the aggregate".

 

[Montecfo]

I'm sure I've left money on the table with my index investing BUT I haven't left much money in the fund managers' pockets.

What is missed is that fees only matter if you have a lower cost fund with the same holdings. In many or most cases you do not.

 

[mathjak107]

let me tell you , if this experiment with the carolina reaper portfolio works as expected i will gladly pay those fees over an index fund

 

[VanWinkle]

let me tell you , if this experiment with the carolina reaper portfolio works as expected i will gladly pay those fees over an index fund

You could start your own investment letter since it is still a secret investment style.