I need a pep talk

[cute fuzzy bunny]

Well, he did compare the American Funds to the Vanguard TOTAL MARKET INDEX

Simply because the American funds said they held equities at all cap levels. The TSM seemed to be a good analog. If nothing else, I figured I wouldnt be accused of comparing the poor American funds with some hybrid ferrari fund

then complained that the American Funds compare themselves to the S&P 500? Morningstar and their brethren set up their software to have the S&P 500 Index as the "benchmark", so how is that American's or anyone else's fault?

American uses the S&P 500 as a comparative benchmark in their prospectus. That is clearly their doing.

There is no real pure index to compare American's portfolios to. They use a multicap strategy with a value bent.

Then isnt it a bit disingenuous to suggest that they 'beat the indexes' as Art has claimed several times and American claims? Against a large cap blend index thats been on a roller coaster ride over the last 12-14 years, you can draw all sorts of favorable comparisons. You carefully pick your start and end dates and you can make all sorts of appealing numbers appear.

I have yet to have ONE client leave American to go somewhere else, Vanguard or otherwise. Mutual funds are a very small part of my business

Hell, if I paid 5.75% up front and believed the pitch that I was getting funds that 'consistently beat the index' when there isnt even a comparable index, I'd probably grit my teeth and stick with it.

Note that I aint saying these are bad investments or bad funds. They're probably the best of the breed. Its just that the breed isnt necessarily the best.

As far as a fight? I presented some data, charts and analysis and asked the experts to tell me if/how the info was wrong. One guy called me a liar and said he'd already posted the info. He hadnt. The other guy disappeared from the discussion.

So I called shenanigans.

 

[FinanceDude]

Simply because the American funds said they held equities at all cap levels. The TSM seemed to be a good analog. If nothing else, I figured I wouldnt be accused of comparing the poor American funds with some hybrid ferrari fund

They hold equities at all levels, but have a large cap weighting with a value bent.

American uses the S&P 500 as a comparative benchmark in their prospectus. That is clearly their doing.

They picked it because that's the index everyone knows, and the index most software found on Google, Yahoo!, Morningstar, Thomson Financial, and others is set up to run. I suppose they could have used a Lehman index or something........

Then isnt it a bit disingenuous to suggest that they 'beat the indexes' as Art has claimed several times and American claims? Against a large cap blend index thats been on a roller coaster ride over the last 12-14 years, you can draw all sorts of favorable comparisons. You carefully pick your start and end dates and you can make all sorts of appealing numbers appear.

I don't control what Art believes......... Also, American never calls me to ask what I think.......

Hell, if I paid 5.75% up front and believed the pitch that I was getting funds that 'consistently beat the index' when there isnt even a comparable index, I'd probably grit my teeth and stick with it.

5.75% is the cost for folks who have under $25,000 to invest. I don't know about Art's client, but most of mine invest $250,000-$500,000 when they invest, and that's only a portion of their new worth. The costs drop significantly with higher numbers.

Note that I aint saying these are bad investments or bad funds. They're probably the best of the breed. Its just that the breed isnt necessarily the best.

American is about risk and return. Call it arrogant, but they truly could care less if folks don't like the fact they allow multicap holdings, go to cash in bad markets, etc. Their investment policy has been in place since 1952, they have the lowest expenses outside of index funds, and they don't advertise. Their management style is like watching paint dry. Most of their funds have less than 30% turnover, while their peeers average 70-100% turnover yearly. Most American Funds have a beta below .80, meaning they are 20% or more less VOLATILE than a market index.

As far as a fight? I presented some data, charts and analysis and asked the experts to tell me if/how the info was wrong. One guy called me a liar and said he'd already posted the info. He hadnt. The other guy disappeared from the discussion.

Whose the "other guy"?? I think the "wrong part" of your data was comparing the American Funds to the Total Stock Market Index. To me, that was "cherry-picking"...... But, I don't pay attention to which index American Funds is "beating", as they are not designed to "beat" anything. To call them conservative is about as big an understatement as calling the current financial market problems a "little hiccup"........

So I called shenanigans.

There's a bar in Milwaukee called that, and they give you a double shot every time you order one.........gotta love those irish!!

 

[Art G]

Pleased to be of service. I just wanted to get to the straight story.

By the way, I forgot to mention that there are two other share classes that help you avoid the 5.75% front end load. The class B shares skip the load, you cant sell them for six years without incurring the load, and they charge you ~1.5% a year ER. The class C shares cant be sold for a year without incurring the sales load, are also ~1.5% a year, and after ten years convert automatically to a share class that requires an annual advisors fee payment.

I guess after holding an investment for ten years, you may need a little paid help with it?

I can clearly see that it's a waste of my time as your numbers are incorrect. However, just to clarify to those who care, bunny selected a C share fund with no front end fee, suggested there was a 5.75% front end load which is incorrect, then used their higher management fees again to show returns. Thus charging you at least twice for the same fund. However, I'm sure few here care if facts are used.

 

[cute fuzzy bunny]

Just to pull this back together, this discussion started around someone saying that these funds beat the indexes, that there was clear proof of that, and that it'd been so overcommunicated that it didnt need to be revisisted.

It does not appear that any of that is true.

It sounds like what you're saying is that these funds dont have a comparable index and that they dont beat any indexes and thats not their intent.

Thats exactly what I said after putting up some data.

However you're going to persist on this 'cherry picking' thing. How is it 'cherry picking' to compare a fund thats loaded up with stock picking experts selecting value stocks from all capitalizations against an index fund thats primarily large cap blend plus a small amount of mid and small cap blend stocks.

Because we all know that value has beaten growth pretty well over the last ten years, and it was proposed earlier in this thread that active management and being able to go to cash helps improve returns.

So how again is it 'cherry picking' to put your funds up against an index that allegedly has both arms tied behind its back?

I also dont see what the front end load has to do with this, whether its 5.75% or something less. I didnt include it in any of the charts. So it was just sort of the bad icing on the cake.

 

[cute fuzzy bunny]

I can clearly see that it's a waste of my time as your numbers are incorrect. However, just to clarify to those who care, bunny selected a C share fund with no front end fee, suggested there was a 5.75% front end load which is incorrect, then used their higher management fees again to show returns. Thus charging you at least twice for the same fund. However, I'm sure few here care if facts are used.

Wrong on all counts. Again.

I did not select a C share fund, I used A share funds in all of the charts, and their ticker symbols are quite easy to read on the charts.

I did not include the front end loads, and used the A share expense ratios. Thus charging less than actual costs of owning these funds.

Your 'facts' comment is hilarious, since you dont have any.

 

[Art G]

Here's the point, in an up market people claim, "sure they've beat the index lately, but what about long term?". So I post long term ACTUAL numbers that have beat the S&P index even going back to the 70's, but that's not good enough. Someone wants to go into the system, pass over the first two funds because it doesn't make his point, select only the C share fund because of the higher expenses, and use this to make a point because C share hasn't been around long enough to show how the American funds have outperformed. Keep in mind, they have done it while most of their funds have a lower beta that 1.00.
However, I post numbers, someone else posts numbers, and people on here will champion and get behind what they want to hear. How can I battle that, when I'm posting actual results and people choose to ignore them?
Yes, bunny has me on ignore, except when he doesn't. Then wonders why I accuse him of lying?

 

[Art G]

Wrong on all counts. Again.

I did not select a C share fund, I used A share funds in all of the charts, and their ticker symbols are quite easy to read on the charts.

I did not include the front end loads, and used the A share expense ratios. Thus charging less than actual costs of owning these funds.

Your 'facts' comment is hilarious, since you dont have any.

Ooops! I guess I'm not on ignore after all. The fund you initially used to make your point absolutely, positively was a C share fund. I don't know how to make that any more clear to the others following along.

 

[2B]

Huge business in 401Ks is the real reason........

Which is a whole 'nother discussion....

My 401k if full of high fee funds but fortunately none have loads. I consider it the greatest financial scandal of our time. This is even worse than the current situation. Employers supposedly responsible for their employees well being are forcing their only tax deferred savings into high fee and sometimes load mutual funds.

 

[Art G]

BTW, I'm pretty much sick of this. Perhaps bunny can follow me over to the stock board to tell everyone why my stock picks suck and they should be picking them themselves. Perhaps he can make a living as my personal posting pest.

 

[Art G]

Which is a whole 'nother discussion....

My 401k if full of high fee funds but fortunately none have loads. I consider it the greatest financial scandal of our time. This is even worse than the current situation. Employers supposedly responsible for their employees well being are forcing their only tax deferred savings into high fee and sometimes load mutual funds.

What's the scandal?? Your employer matching fees for you or the pretax dollars part? As far as I know, no one is forced to participate in a 401k.

 

[FinanceDude]

Didn't we start out with the OP asking if paying a 1.5% wrap fee on TOP of the expense ratios of the uinderlying funds were a good idea?

Now we are bickering about a fund company that outside of Fido and VG has the lowest expenses of any mutual fund family, PERIOD!!!

 

[2B]

I can clearly see that it's a waste of my time as your numbers are incorrect. However, just to clarify to those who care, bunny selected a C share fund with no front end fee, suggested there was a 5.75% front end load which is incorrect, then used their higher management fees again to show returns. Thus charging you at least twice for the same fund. However, I'm sure few here care if facts are used.

I was the one that selected a C fund out of the 78 funds that were listed as American Funds. Don't throw that at CFB. I selected one fund at random and found it didn't compare well. I asked you for a list of funds that beat their respective index funds over 1, 3, 5 and 10 years (4 star funds) and you have never replied.

FD seems to think there isn't a comparable index to compare the funds to. That seems convenient. That also makes it easy to complain about any of the CFB comparisons.

I have requested data. CFB presented data which didn't meet your standards. You haven't replied with data only diatribes.

IMHO, you have not made any credible rebuttal to the statement that a diversified index fund portfolio (or ETFs) will outperform a comparable American Fund portfolio (if one can ever be constructed).

 

[Art G]

I just checked one. AMPCX is a large cap growth fund for the benefit of any readers. It failed miserably and I'm assuming that the numbers don't include the load.

1 Year 3 Year 5 Year Since Incep.
AMPCX -14.73% +1.09% +4.26% +2.57%
Category -9.28% +3.47% +6.05% --
Index -11.14% +3.66% +6.92% +10.78%
as of 8/31/2008

I could check the other 77 American funds. I'm sure I could find one or two that might have beaten their index consistently.

I think it's kind of silly for trolls to make incorrect statements and not have them checked. If you would like, post a list of the 78 funds and give 1 star for beating either the 1, 3 or 5 year performance of the index. You could make it even shorter if you'd post the ones that have beaten the 1, 3 and 5 year index performance (the 3 star funds). For these it would be nice to know if they also led the 10 year performance. These are the 4 star funds. Of course, subtract the load from the performance.

Here's the post so no one has to take the time to go back to the first page...

 

[FinanceDude]

Which is a whole 'nother discussion....

My 401k if full of high fee funds but fortunately none have loads. I consider it the greatest financial scandal of our time. This is even worse than the current situation. Employers supposedly responsible for their employees well being are forcing their only tax deferred savings into high fee and sometimes load mutual funds.

Loads are waived for any 401K funds that have assets greater than $1 million. There's a LOT of polliticking on large plans, often they are split into "pieces". If the college roommate of the CEO works for Merrill Lynch, you WILL have proprietary funds in them.........

 

[Art G]

I was the one that selected a C fund out of the 78 funds that were listed as American Funds. Don't throw that at CFB. I selected one fund at random and found it didn't compare well. I asked you for a list of funds that beat their respective index funds over 1, 3, 5 and 10 years (4 star funds) and you have never replied.

FD seems to think there isn't a comparable index to compare the funds to. That seems convenient. That also makes it easy to complain about any of the CFB comparisons.

I have requested data. CFB presented data which didn't meet your standards. You haven't replied with data only diatribes.

IMHO, you have not made any credible rebuttal to the statement that a diversified index fund portfolio (or ETFs) will outperform a comparable American Fund portfolio (if one can ever be constructed).

I thought I did post numbers. They don't directly compare to the S&P because most have a lower beta and hold cash. A lot of the information can't be posted without prior approval from the company and compliance.
If you want the index, why not buy SPY?

 

[2B]

What's the scandal?? Your employer matching fees for you or the pretax dollars part? As far as I know, no one is forced to participate in a 401k.

No one is forcing me to participate. The unfortunate choice of participating in high fee funds is better than not taking advantage of the tax deferral.

Why not give people the choice of low cost index funds? Maybe the high fee fund companies give "free" 401k plans to the employers or other kickbacks. I guess it doesn't matter since employers don't have a fudiciary responsibility.... or do they?

 

[Gardnr]

I started to do that but I found that the ETFs for some of the subsets frequently traded with high bid/ask spreads. They also would go through periods of relative inactivity.

If you're trading then that matters. If you're buying for a largely buy and hold portfolio then the actual entry point price doesn't make much difference and neither does trading volume. Unless I'm missing something, which is very possible.

 

[2B]

Loads are waived for any 401K funds that have assets greater than $1 million. There's a LOT of polliticking on large plans, often they are split into "pieces". If the college roommate of the CEO works for Merrill Lynch, you WILL have proprietary funds in them.........

What a coincidence....

The CEO of a prior employer was in the same Harvard MBA class as Russell. We had our 401k through them. That's a wonderful way to make a selection for his employees.

 

[2B]

If you're trading then that matters. If you're buying for a largely buy and hold portfolio then the actual entry point price doesn't make much difference and neither does trading volume. Unless I'm missing something, which is very possible.

That's true but the cost above NAV is equivalent to a load. The load is not that large but I've seen the ETF 0.5% above its index at the close. I have no way of knowing what's going on during the day.

I do currently own SPY and IWD. I was going to build an ETF portfolio but I changed my mind when I started looking at the other asset classes based on my above comment.

 

[cute fuzzy bunny]

Hilarious. Art cant even figure out who posted what. Hey Art! Theres a name right to the left of each post, and they're often different!

And the two financial guys pitching the funds dont even agree. One says the funds beat the indexes, that anything else presented is wrong and full of lies, while not offering any alternative data, and the other says the funds dont beat the indexes, arent intended to, and there arent any comparable indexes.

As far as following you around pestering you, anyone that thinks you have any credibility whatsoever needs to re-evaluate that position.

BTW, I only took you off of ignore so I could read through your posts to see where you repeatedly put performance information out for the funds. There werent any. I forgot to put you back on. Thanks for reminding me.

 

[Art G]

Yes, I disagree with FD. So what? I must agree with everything he types because you think I should? I've already posted the fund you selected (or 2b selected, whoever) and showed that over the long term, it did outperform the S&P. However, that's not good enough for you. I've gotten some of my info from my local newspaper, perhaps they're in cahoots with American funds.
As to who's posting what, you're right, I rarely read the names, I usually base my responses on each individual post, that way, unlike you I don't have preconceived opinions. Nonetheless, the thread was started by comparing a C share, just as I said.

 

[Art G]

No one is forcing me to participate. The unfortunate choice of participating in high fee funds is better than not taking advantage of the tax deferral.

Why not give people the choice of low cost index funds? Maybe the high fee fund companies give "free" 401k plans to the employers or other kickbacks. I guess it doesn't matter since employers don't have a fudiciary responsibility.... or do they?

Yes, they have a fiduciary responsibility. However, it is limited to their not overcharging you for funds, (American funds have some of the lowest fees around), and making sure you have ample choices. I'm assuming your company is not in the employee investment business so their main concern is finding a provider who sends out statements regularly, can handle questions from employees, and generally isn't a pain to deal with. I would hope you'd rather have your company focusing on profits than adding additional funds (which may incur additional fees to the 401k btw).
And no, the employer is not getting a kickback, although some TPA's charge less than others.

 

[Gardnr]

That's true but the cost above NAV is equivalent to a load. The load is not that large but I've seen the ETF 0.5% above its index at the close. I have no way of knowing what's going on during the day.

Oh, I see. You're talking about the premium/discount from the NAV, and pointing out that they usually (always?) run at a premium. But that would be a wash if you get that premium at the sale too, no?

Of course who knows what that price will be when you eventually sell years down the road, but I think that over a long period of time that the lower ER would overcome that premium even if you didn't get it on the sale.

Interesting point to consider.

 

[FinanceDude]

And the two financial guys pitching the funds dont even agree. One says the funds beat the indexes, that anything else presented is wrong and full of lies, while not offering any alternative data, and the other says the funds dont beat the indexes, arent intended to, and there arent any comparable indexes.

I'm not "pitching them" to you, or anyone else for that matter....... I think we need an ETF thread..........

 

[cute fuzzy bunny]

Okay, I'm getting the picture. Not only do the funds not beat the index or have a comparable index, but you dont want to sell them to anyone either?