I need a pep talk

[2B]

I know many on here will advise index funds, however, I would instead advise finding funds that will hold cash. The mutual fund manager who is forced to be 100% invested will merely try to find the best of a bad situation. Instead, find a manager who can actively manage. JMO

Feel free to disagree with every research study ever done that says actively managed funds routinely underperform their index and none do it consistently.

Hope springs eternal for that really smart guy or gal that can.

 

[willowbeezer]

Momentum is down on the indexes. we continue to get bad news from the financials / housing. Credit is tightening up increasing the cost of capital for financials and businesses. job market is challenged. and frankly, folks are coming home to see their portfolio decimated and some may call their brokers in the morning.

I am wondering if it makes sense to reallocate more to cash until the uncertainty subsides (no need to catch the bottom). My risk tolerance is moderate and in my opinion the riskiness of holding positions (ie. overnight/over the weekend / long term with an allocated portfolio) seems like too much risk for me (its not investing right now, its a roll of the dice). I've been 95% in cash since around June and missed much of the bloodbath - also been shorting the indexes intraday during the massive drubbings.

I've been lucky so far and am slightly up for the year, primarily by going to cash when the market momentum started to go down.

Perhaps I won't be in the market when this market turns but at this point, I am okay with that. I do believe in an allocation strategy but i just don't know if this is the right time.

With regards to the managed SB fund.. I don't know if I would pay 1.5% for the privilege of getting market returns which suck. I would also diversify my holdings and keep them in different accounts - don't put all your eggs in one basket - you just don't know which bank will get squeezed next.

Just my humble opinions.

Best of luck to all.

 

[Art G]

Feel free to disagree with every research study ever done that says actively managed funds routinely underperform their index and none do it consistently.

Hope springs eternal for that really smart guy or gal that can.

Soooooo, why not instead find those funds that HAVEN'T underperformed the index consistently? Just because your friends are jumping off the bridge, does that mean you have to?
Sorry, but I always find it silly for people to say, yeah, but they have outperformed 70% of the funds out there. It seems to me I've now got 30% of the funds in the world to investigate. JMO
BTW, American Funds do it consistently. Check your stats.

 

[FinanceDude]

My experience with SB is that the 1.5% fee is assessed QUARTERLY. It doesn't sound like much, until you look at your statements.

In round numbers, and in a VERY basic example:

On a $1 million portfolio, SB takes $15,000 out every quarter, and lists it on a small line in the 6 page report. That means that every year you pay them $60,000!

Look at that from the perspective of being retired and realize you are paying $60,000 every year and it really starts to add up. That money comes out of your funds first.

20 years with SB Trak, and you have paid them in excess of $1.2 million!!!!

Your are wrong. The 1.5% is assessed on an annual basis, but paid quarterly, so .375 or $3,750 is billed quarterly. Keep in mind that does NOT include the ER of the underlying funds that SB puts in there, so the REAL number is undoubtedly means you're paying in excess of 2% a year.

It's still way too much to pay, but I digress.........

 

[FinanceDude]

I believe we've reached general agreement that no management fee is ever justified and that complicated financial products are best avoided.

VG charges management fees too...........so I guess you're 100% in cash..........making you smarter than Warren Buffet........

 

[2B]

Soooooo, why not instead find those funds that HAVEN'T underperformed the index consistently? Just because your friends are jumping off the bridge, does that mean you have to?
Sorry, but I always find it silly for people to say, yeah, but they have outperformed 70% of the funds out there. It seems to me I've now got 30% of the funds in the world to investigate. JMO
BTW, American Funds do it consistently. Check your stats.

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.

 

[2B]

VG charges management fees too...........so I guess you're 100% in cash..........making you smarter than Warren Buffet........

VG charges less than 0.3% on any of my funds. Most are under 0.1%. If I could get a lower cost index fund, I would. I'm stuck paying 0.6% in my 401k and it chaffes my butt.

Back in the old days, there wasn't a choice of low fee funds. The 1+% was the cost of being in the game. There's no reason to pay more than necessary.

 

[FinanceDude]

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

Which index are you picking? It needs to be large cap growth index if you want apples to apples...........

 

[Art G]

2B....interesting, you chose the C share version because....perhaps their fees were a tad higher?
It's not their best fund, but no matter....

AMCAP most recent I could find.....

1yr. -14.72
5yr 5.89
10 yr.5.58
lifetime 11.66

S&P Index

1 yr. -13.11
5 yr. 7.58
10 yr. 2.88

So, after 5 years, the Index never comes close. I appreciate you showing how stats can be manipulated when need be.

 

[FinanceDude]

VG charges less than 0.3% on any of my funds. Most are under 0.1%. If I could get a lower cost index fund, I would. I'm stuck paying 0.6% in my 401k and it chaffes my butt.

PSSSTTT........ETF's..........

 

[Art G]

I doubt his 401k offers ETF's.

 

[FinanceDude]

I doubt his 401k offers ETF's.

I was referring to lowering his VG expense.

 

[2B]

2B....interesting, you chose the C share version because....perhaps their fees were a tad higher?
It's not their best fund, but no matter....

They were selected at random. I didn't want to take the first one on the list. I think I picked the third one. I didn't compare any fees or even look at a second fund. One loser was enough.

It's always hard to know which one will be the best fund over the next 10 year period.

It would be interesting to see a list of 4 star funds.

 

[2B]

PSSSTTT........ETF's..........

Some ETFs are too thinly traded and frequently have large bid/ask spreads. I have SPY and IWD.

My 401k is through Hartford and I have an S&P index fund with about a 0.6% fee.

 

[Art G]

They were selected at random. I didn't want to take the first one on the list. I think I picked the third one. I didn't compare any fees or even look at a second fund. One loser was enough.

It's always hard to know which one will be the best fund over the next 10 year period.

It would be interesting to see a list of 4 star funds.

I believe FD has on several occasions listed how American Funds has performed vs. the S&P, and I'm pretty danged sure that every American Fund has beaten the index at worst over the last 10 years and most over the one, three, and five year time period. However, they don't have that many funds so you should check out their A funds, maybe 15 of them or so?

 

[cute fuzzy bunny]

Oh dear, I got tired of the pointless sand kicking so I pulled up four american funds I imagined people would be interested in as core portfolio elements and charted them against their vanguard equivalents, at least as far as I could ascertain. I'm sure I'll be told I picked the wrong ones, but if thats the case I'd ask whoever asserts my incorrectness will supply a corrected chart and the reason why the ones I picked were wrong...

Short answer is the vanguard version is as good or better over the last ten years, and I'm guessing since they arent actively managed, they have less turnover, fewer taxable events, and lower internal trading costs. Plus of course no loads and lower expenses. Since this time period includes two bull and two bear markets, and all sorts of other financial events, I'd imagine it'd be a great showcase for active vs passive management. What it says is that active management, by these allegedly superior examples, does one pretty much no good whatsoever.

I picked the american balanced vs vanguard balanced, american euro/pacific vs vanguard total international, american AMCAP vs vanguard total stock market, and both companies target retirement 2025 funds.

Voila:

 

[harley]

You're no fun. If you are going to ruin a good round of bitchiness with facts, we're just going to have to ask you to leave.

 

[cute fuzzy bunny]

Yeah, I'm a stick in the mud.

I'm sure I picked the wrong funds to compare, but american didnt seem to offer anything obviously clear like "US large cap value". Lots of multi-cap funds with options to purchase foreign stocks, bonds, popsicle stick collections, etc.

 

[kitty_37]

Re: TRAK
Don't do it. DH and I bought some with a windfall when young, and I have always regretted it.
Fees from constant rebalancing, throws capital gains, and it's a SB proprietary fund and can't be transfered out of SB without selling all. I felt stuck and eventually liquidated a bit at a time in order to get it out and stop the bleeding.

Go to Fidelity or Vanguard.

 

[cute fuzzy bunny]

I'm sure I'll be told I picked the wrong ones

But maybe not.

 

[sailor]

I doubt his 401k offers ETF's.

Don't be too sure, for example mine does.
Administered through Schwab, in addition to 'plain vanilla' mutual funds also has something called Personal Choice Retirement Account and it's basically a brokerage account inside 401k.

 

[Art G]

But maybe not.

I'll let FD deal with this if he wants to. You make my head tired. Every statistic I have shows American Funds outperforming the indexes AND it has been posted on this board often enough that either you don't want to see it or......well you just don't want to see it.
BTW, they have some of the lowest expenses in the business, they trade very, very rarely as they have to go before a board and give good reason why they want to sell a stock before a year, and before they buy any company, they spend weeks on site. They also use a multi managed system so they're not tied to one manager.
Your charts are very pretty though, wrong, but very pretty. Sleep well knowing you're managed in a mutual fund by no one.

 

[cute fuzzy bunny]

Sorry about the actual facts. I havent seen a dang thing posted about American funds and their matching indexes comparative performance. If its been so exhaustively posted that you're bored with it, could you please point me to a thread?

I chose the highest returning funds with my best effort given their nebulous descriptions and paired them with boring broad indexes that seemed to match. Americans flagship multicap fund doesnt compare well with the boring old total stock market index. Its that simple.

I could see where there are places where I could have started the comparison to favor either fund...for example the AMCAP fund didnt take a big beating from the 2000-2001 downturn, but it performer poorly before and after that. So I could have cherry picked a "winning range".

I just took a straight ten year run full of bulls and bears. No chicanery. At most periods the funds were comparable and moved the same way at the same time.

Can you also explain why the charts are 'wrong' and offer an alternative chart? You are correct in one sense...these charts dont include the 5.75% front load the AMCAP fund charges at time of purchase. That'd make their numbers look even worse. My bad.

Oh, and by the way the turnover on AMCAP is 29%. Total stock market is 4%. So much for the 'rare trading'.

 

[Marquette]

Every statistic I have shows American Funds outperforming the indexes AND it has been posted on this board often enough that either you don't want to see it or......

I recall a lot of discussions about American Funds but nothing ever compelling... either a statement that Bogle likes them too (but the latest statement I could find said that he didn't, with no other evidence to the contrary but FD's recollection that he must have at some point), or cries that people are picking the wrong funds to compare, etc etc etc.

Maybe you can tell me what I'm doing wrong, I went to Google and compared AMCPX against SPY since that seems to be what you're considering a comparable index (correct me if I'm wrong).

5 year:
View attachment 4684

The max it would let me compare:
View attachment 4685

Things look a bit better for AMCPX at Morningstar if you look at the full range:
View attachment 4687

But not the 4 year (the amount of time I've been investing)
View attachment 4686

So, instead of whatever it is you're doing, why don't you show off your stats too. I'd love to learn more, I'm pretty new to this stuff.

 

[Art G]

I've got books right in front of me, and in looking at EVERY A (all 15)share stock fund (including balanced and income) that they have, have outperformed the S&P over the last 10 years, and only AMCAP, Balanced fund and Washington Mutual have underperformed it slightly over the last five years. Over a one year period (as of the end of 2nd quarter) only AMCAP, New Economy, Smallcap World, and Washington Mutual have slightly underperformed the index.
They only have 15 funds that fall into the stock category, so bunny's claims of making it sound like they're fund loaded is wrong. They do have various share classes.
BTW, choosing AMCAP sure seems like cherry picking, seeing that it's their worst performer. However, it still wins out over a 10 year period by doubling the return of the S&P, so go figure.
Again, FD has posted actual statistics countless times, but it seems on this board, when shown facts, the topic just moves on elsewhere. I don't have the patience he possesses.
BTW, expense ratio on AMCAP is .65%. OUTRAGEOUS! And a turnover ratio of 29% is incredibly low for an actively managed fund, although they have some lower and some higher. Who wants a zero turnover?? You'd be better off with an ETF or UIT then.
One more note, over the fund life of AMCAP (5/1/67), it has earned 11.66% average annual rate of return vs. the S&P in the same time frame's 10.01%. If facts mean anything of course.