I found a Growth Mutual Fund that has beat its peers for 90% of the last 20 years- Wh

[garyt]

While I agree that outperformance is likely random, this is one of the most common yet least persuasive arguments.

How would said person know they had such talent and keep it to themselves? IRL, they would get their Ivy MBA and start with VG/Fido/Black Rock or a hedge fund as a junior for a decade. Then if they were really good they would get to manage a large mutual fund. It would take another 10 years for them to "prove" outperformance. Then at 45ish they get to decide do I play with OPM and make $XM/year salary/bonus or strike out on my own with whatever capital I have accumulated. Some would do the latter, but many would "diversify" by taking the megacorp OPM income and investing their own capital in parallel. Honestly, outperforming the market by one or two percent (which is what we are talking about when we say "beat peers") isn't some secret sauce that will make an individual wealthy in just a few years.

The ones that make bank in hedge funds in their 20s/30s are "aggros" as we say in poker. But that is a high variance game and it is not obvious it is best for any individual player due to the variance. Likely that more bust out than win.

Agree completely. The "why would they not invest on their own and buy an island/" is silly for many reasons.

 

[SecondCor521]

Did I miss something or didn't OP name the fund in post 27?

I've been reading this thread regularly, and I usually read all posts carefully. I'm fairly confident post #27 didn't have the name of the fund in it when the subsequent posts pointing out that it hadn't been named yet were written.

In other words, timeline is something like:

OP writes post #27 and it doesn't have the name of the fund in it.
Several other posters post #28 and following pointing out that the fund hasn't been named
OP edits post #27 to list the name of the fund.

It's either that, we're all careless thread readers (including me, and I'm usually not careless), or there was a glitch in the matrix. My vote is on an OP edit.

 

[Time2]

I haven't seen where anyone mentions the drop from 52 to 8 around the year 2000, it didn't do quite so bad in 2008 it only dropped 54%. It only did real well in the last 18 months starting at the low of the Covid drop.

 

[UnrealizedPotential]

I haven't seen where anyone mentions the drop from 52 to 8 around the year 2000, it didn't do quite so bad in 2008 it only dropped 54%. It only did real well in the last 18 months starting at the low of the Covid drop.

I was going to mention those ugly years, but I saw little reason to. I suspected OP knew the down years wouldn't live up to close examination and that is why OP was very reluctant to name the fund.

 

[SecondCor521]

I haven't seen where anyone mentions the drop from 52 to 8 around the year 2000, it didn't do quite so bad in 2008 it only dropped 54%. It only did real well in the last 18 months starting at the low of the Covid drop.

That falls under the "90% of the time" exception.

 

[REWahoo]

Exactly. OP either name the fund or stop posting in this thread because it's pointless to continue otherwise.

He did name it. See post #26.

 

[Sojourner]

I was going to mention those ugly years, but I saw little reason to. I suspected OP knew the down years wouldn't live up to close examination and that is why OP was very reluctant to name the fund.

Yeah, the M* chart from post #42 completely undermines OP's claims from post #1. Completely. So much so that I don't see how OP could've made those claims with anything resembling sincerity.

OP, if you're still here and you really, honestly believed what you said about this fund, please explain how you can square the fact that it has ranked at or near the bottom quartile vs. its peers for 5 out of the past 11 years with your statements quoted below:

Over 90% of the time it beats the competition year after year.

This Fund just does better than its peers year after year after year after year!

 

[SecondCor521]

He did name it. See post #26.

This thread is changing underneath us. See my commentary in (currently) post #52:

https://www.early-retirement.org/fo...-the-last-20-years-wh-111328.html#post2678161

Where the post you're referencing was post #27 then. Since it's #26 now, my guess is that a post above it got deleted. Probably a post by the OP, but I'm not keeping track close enough, and honestly don't really care.

 

[REWahoo]

I've reached "Not my monkey, not my circus" status on this thread.

Carry on...

 

[RunningBum]

I wonder if at the start of 2018 or 2020, before those killer years, if CPODX was a screaming BUY.

Peter Lynch at Magellan is the best example of an expert mutual fund manager who consistently beat the market. He managed Magellan from 1977-90, though the fund didn't open to the public until 1981. I can't easily find his yearly records, but this Wiki page starts at 1984:
https://en.wikipedia.org/wiki/Fidelity_Magellan_Fund
I don't know when he stepped down in 1990 so I won't count that loss against him, but he only beat the market 4 out of 6 years 1994-1999.

https://www.globalbrandsmatter.com/...-lynch-why-his-track-record-at-magellan-was-1 has this chart:

Clearly the fund did much better than the S&P overall, but there were some significant drops, worse than the S&P, in 1981, 1984, 1987 and 1989. It would appear he took risks. Many paid off, but some did not.

Certainly no one was going to jump in the fund in 1977 (even if they could) and expect such superior performance. They would see after a few years that it did well. So let's see what happens if you bought the fund after a great run, compared to the S&P 500. I'll guess that big drop in 1981 had something to do with opening the fund to the public, so I won't start just before that. But how about early 1983, after a great run in 1982:

You could have bought the fund for ~$400, and at the end of the chart it's at $604.66. About 50% higher. Or you could have bought an S&P 500 index at around $75? Hard to tell, but definitely under $100. And at the end of the chart it's at $233.79. More than doubled, probably even tripled. Hmmm. It looks like a fast start while the fund was private juiced his overall return, but it's not that great once the public got could get in. Really good returns, because the market did well in the 80s, but he wasn't actually beating the market after establishing his track record. Am I reading that chart wrong?

 

[finnski1]

I wonder if at the start of 2018 or 2020, before those killer years, if CPODX was a screaming BUY.

Peter Lynch at Magellan is the best example of an expert mutual fund manager who consistently beat the market. He managed Magellan from 1977-90, though the fund didn't open to the public until 1981. I can't easily find his yearly records, but this Wiki page starts at 1984:
https://en.wikipedia.org/wiki/Fidelity_Magellan_Fund
I don't know when he stepped down in 1990 so I won't count that loss against him, but he only beat the market 4 out of 6 years 1994-1999.

https://www.globalbrandsmatter.com/...-lynch-why-his-track-record-at-magellan-was-1 has this chart:

Clearly the fund did much better than the S&P overall, but there were some significant drops, worse than the S&P, in 1981, 1984, 1987 and 1989. It would appear he took risks. Many paid off, but some did not.

Certainly no one was going to jump in the fund in 1977 (even if they could) and expect such superior performance. They would see after a few years that it did well. So let's see what happens if you bought the fund after a great run, compared to the S&P 500. I'll guess that big drop in 1981 had something to do with opening the fund to the public, so I won't start just before that. But how about early 1983, after a great run in 1982:

You could have bought the fund for ~$400, and at the end of the chart it's at $604.66. About 50% higher. Or you could have bought an S&P 500 index at around $75? Hard to tell, but definitely under $100. And at the end of the chart it's at $233.79. More than doubled, probably even tripled. Hmmm. It looks like a fast start while the fund was private juiced his overall return, but it's not that great once the public got could get in. Really good returns, because the market did well in the 80s, but he wasn't actually beating the market after establishing his track record. Am I reading that chart wrong?

looks like the chart was normalized for %. They both start at 0% so it looks like he almost tripled the s&p during that period.

 

[RunningBum]

looks like the chart was normalized for %. They both start at 0% so it looks like he almost tripled the s&p during that period.

Did you read my post?

 

[ejman]

Though crowd. Just a little bit of hyperbole from the OP and all the engineers and accountants on the board can't wait to introduce a little bit of truth into the hyperbole. Give a new poster a chance! how are we going to grow the ranks of FIRE folks at the board if we pounce on hyperbole from new members? ( just having fun with this thread. Moderators please delete this post if not appropriate).

 

[ERD50]

Did I miss something or didn't OP name the fund in post 27? Maybe time to take a look and not dump on OP (at least until evaluating the fund for yourself.)

I'm not knowledgeable enough to comment on the info found in the post, but it seems like the fund has done well - for its short history. I'm not buying it as I have my AA set up the way I want it.

Good luck to OP - whatever you decide. Maybe check back here if we haven't driven you off!

+1 I was about to post something about how much fun it is to watch a new troll pester everybody and then Koolau pointed out how easy it is to skip by key posts when you are skimming So, CPODX it is.

I've been reading this thread regularly, and I usually read all posts carefully. I'm fairly confident post #27 didn't have the name of the fund in it when the subsequent posts pointing out that it hadn't been named yet were written.

In other words, timeline is something like:

OP writes post #27 and it doesn't have the name of the fund in it.
Several other posters post #28 and following pointing out that the fund hasn't been named
OP edits post #27 to list the name of the fund.

It's either that, we're all careless thread readers (including me, and I'm usually not careless), or there was a glitch in the matrix. My vote is on an OP edit.

He did name it. See post #26.

This thread is changing underneath us. See my commentary in (currently) post #52:

https://www.early-retirement.org/fo...-the-last-20-years-wh-111328.html#post2678161

Where the post you're referencing was post #27 then. Since it's #26 now, my guess is that a post above it got deleted. Probably a post by the OP, but I'm not keeping track close enough, and honestly don't really care.

I also think it was an edit. I wasn't following super closely, but my big question while reading was "Why not name the fund, someone will do an analysis?" So if OP named it, I would not have been thinking that, and when I saw others mention post #27/26, I was confused.

I think this forum software used to show last edit. Some other forums I'm on do. On this one, it used to ask for a reason (optional, but sometimes handy to just say "typo". I haven't seen that in years.

-ERD50

 

[finnski1]

Did you read my post?

Ha. Apparently I didn't read it too well the first time. Got it now.

 

[ERD50]

Though crowd. ...

I don't consider asking for evidence to be a sign of a "tough crowd". Heck, we're all looking for something to boost our risk-adjusted ROI, so we're just very curious.

-ERD50

 

[NW-Bound]

I did not see the MF name posted earlier. The OP edited to add it later. Anyway, I look at CPODX out of curiosity. Here's what I saw.

From the inception in 1998 to 2000, the fund went up big time. $10K invested on 1/1/1998 became $40,021 on 2/29/2000, while the S&P got to $14,586. I remember that period very well, as it marked the peak of the dot-com era.

But, but, but, after that, CPODX crashed big time, along with the NASDAQ when the dot-coms and the tech stocks imploded. In fact, $10K invested on 1/2000 became $2102 on 3/2003, while $10K with the S&P bottomed out at $5727 on Oct 2002. I remember Oct 2002 very well, as I myself was down to 56c on the dollar.

From that nadir, CPODX tends to beat the S&P slightly each year. It also went down more than the S&P in a bad year. But because it crashed so much harder after the dot-com bust, it took several years to recover to the same level as the S&P. In fact, $10K invested in CPODX and the S&P in Jan 1998 became $11K in Jan 2009 for both investments. The early gain of CPODX was wiped out and it took several years to catch up back to the S&P.

The fund really outperformed since March 2020, in fact doubled in 2020!

Where does it go from here? Beats me. I looked at the fund holdings, and these are the stocks that I have never followed, such as Square Inc, Uber, Twitter, Shopify, Zoom, Snap, Spotify, Twilio, Snowflake, etc...

You could have bought an ARK ETF to get more than 2x growth in 2020 the same way. The holdings are also companies that I don't follow, in fact some I have not heard of.

 

[Digital Nomad]

So, my example Growth Mutual Fund did not have a perfect record. But my question still stands and as yet has not been answered fully. So I will ask the question again:

Most Mutual Funds don't beat the S&P 500 over a long period of time but if you do your research there are a handful of funds that over a long period of time beat a total stock market funds and its peers. I believe some of this success is dumb luck or risk-taking but much of the success is just due to a superstar manager and his/her team that just know how to pick winning stocks and know when to buy and sell. Do you agree and why?

Other example Growth Mutual Funds that over the last 20 years have done very well in relation to its peers are: FOCPX and FBGRX. (Two Fidelity Investments standout funds.)

 

[RunningBum]

You got plenty of answers. The answer is no. I guess you don't think you are getting a full answer until someone agrees with you? If you want to go with your assumption, by all means go ahead. You don't need our approval.

 

[ERD50]

So, my example Growth Mutual Fund did not have a perfect record. But my question still stands and as yet has not been answered fully. So I will ask the question again:

Most Mutual Funds don't beat the S&P 500 over a long period of time but if you do your research there are a handful of funds that over a long period of time beat a total stock market funds and its peers. I believe some of this success is dumb luck or risk-taking but much of the success is just due to a superstar manager and his/her team that just know how to pick winning stocks and know when to buy and sell. Do you agree and why?

Other example Growth Mutual Funds that over the last 20 years have done very well in relation to its peers are: FOCPX and FBGRX. (Two Fidelity Investments standout funds.)

You got plenty of answers. The answer is no. I guess you don't think you are getting a full answer until someone agrees with you? If you want to go with your assumption, by all means go ahead. You don't need our approval.

The trouble is, how could anyone ever know if it was skill or luck?

That's 2 out of thousands of funds. Surely, we should expect at least a couple to outperform out of all those? Could be the monkeys on typewriters effect, could be skill.

And if it is skill, how can we have any assurance that skill will continue going forward? That skill may have been a match for the times, and maybe not a match for the future times. Can future management have the same skills? It's really a hard thing to nail down.

So unless I see something really convincing (and unfortunately, that sort of advantage would probably get arbitraged away anyhow), I'll stick with the passive broad indexes. At least with those, I have a pretty good assurance that they will continue to track the index, for better or for worse.

-ERD50

 

[finnski1]

The trouble is, how could anyone ever know if it was skill or luck?

That's 2 out of thousands of funds. Surely, we should expect at least a couple to outperform out of all those? Could be the monkeys on typewriters effect, could be skill.

And if it is skill, how can we have any assurance that skill will continue going forward? That skill may have been a match for the times, and maybe not a match for the future times. Can future management have the same skills? It's really a hard thing to nail down.

So unless I see something really convincing (and unfortunately, that sort of advantage would probably get arbitraged away anyhow), I'll stick with the passive broad indexes. At least with those, I have a pretty good assurance that they will continue to track the index, for better or for worse.

-ERD50

Exactly.

I remember when Bill Miller famously beat the s&p index for something like 15 years. However he subsequently lagged it significantly thereafter especially during and after the great recession since he was heavily into financials.

 

[Sojourner]

So, my example Growth Mutual Fund did not have a perfect record.

Yes, OK... but why did you start this thread by posting blatantly incorrect info about your fund? As has been pointed out in many recent posts, your fund was obviously not better than its peers "year after year after year" as you claimed, nor did it outperform its peers "90% of the time, year after year." I just find it very confusing how you could have been this wrong about your fund when the actual data regarding its performance is so freely available.

Most Mutual Funds don't beat the S&P 500 over a long period of time but if you do your research there are a handful of funds that over a long period of time beat a total stock market funds and its peers.

OK, now you're referring to "total stock market funds" as the benchmark against which you want to make comparisons. Obviously there will be some funds (both passive/indexed and actively managed) that beat "total stock market funds" over arbitrarily chosen time periods. None of those funds will, however, outperform their peers consistently over long time periods. And if, by some odd quirk or happenstance, a tiny number of those funds did happen to outperform their peers consistently, over many years, you would have absolutely no way to predict that in advance other than by lucky guessing.

I believe some of this success is dumb luck or risk-taking but much of the success is just due to a superstar manager and his/her team that just know how to pick winning stocks and know when to buy and sell. Do you agree and why?

No. There has never been, to my knowledge, any "superstar manager" whose fund consistently outperformed its peers over long time periods (say, 20+ years). Please correct me if I'm wrong, and then tell me how you would've known to invest in this fund at the beginning of its great outperformance run.

 

[Aerides]

So I will ask the question again:

I believe some of this success is dumb luck or risk-taking but much of the success is just due to a superstar manager and his/her team that just know how to pick winning stocks and know when to buy and sell. Do you agree and why?

dumb luck, risk and picking a window = yes
superstar manager/team = no

Some people have winning streaks. But time and again the market and experts have been surprised by ups and downs. The idea that there are a handful of stars with actual crystal-ball foresight going at it for years, seems...at best, highly unlikely.

I have a few hand picked stocks I tinker with. I've been extraordinarily lucky with these picks (FB, SQ, etc.), and my little <1% of assets account outperforms my VTSAX et al. But I'm not a superstar picker, I just got lucky on this little pot.

 

[easysurfer]

Indexing vs Mr. Goxx the hampster.

I'm still choosing good, old, boring Indexing.

 

[Qs Laptop]

So, my example Growth Mutual Fund did not have a perfect record. But my question still stands and as yet has not been answered fully. So I will ask the question again:

Most Mutual Funds don't beat the S&P 500 over a long period of time but if you do your research there are a handful of funds that over a long period of time beat a total stock market funds and its peers. I believe some of this success is dumb luck or risk-taking but much of the success is just due to a superstar manager and his/her team that just know how to pick winning stocks and know when to buy and sell. Do you agree and why?

Other example Growth Mutual Funds that over the last 20 years have done very well in relation to its peers are: FOCPX and FBGRX. (Two Fidelity Investments standout funds.)

Yes, I agree there are some mutual fund managers that are successful because they know what they are doing. I think this is true because:

1. They clearly state their objectives and methodology for the investments they make for the fund.

2. They make stock picks consistent with their objectives.

3. They have a track record of beating the indexes over 3, 5, 10, 15, or 20 years. (This fact alone should rule out luck as being how they do it.)

4. There aren't that many of them.

Just as there are superstars in sports there are superstar investors. Not very many people can dunk a basketball but some can. Not very many people can hit 40 HRs a year, but some can. Same thing with professional investors.

(I see you are new here to ER. I would suggest you place comments about specific investing ideas in the Active Investing and Market Strategies forum, a safe space created where people that aspire for the greatness of the humdrum returns of the index cannot attack you.)