Am Funds Ad. Better than index(?).

[flintnational]

New Economy and Growth Fund beat both VFINX and VTSMX at 5 years without a load; Amcap beat VTSMX without a load at 5 years.

New Economy with a load beats VFINX in 10 years.

New Economy and Amcap without a load beats both VFINX and VTSMX in 10 years.

New Economy is not one of the five funds mentioned in the article that is the topic of this thread. None of the five funds mentioned in the article beat the index over 1, 5 or 10 years with loads included, per American Funds own data as stated in the ad. See the American Fund chart from the ad at post #64. The blend of the five funds, American Funds chosen metric, also under performed the index at 1, 5 and 10 years with or without loads. Once again, all of the under performance is clearly stated in the American Fund ad.

 

[Qs Laptop]

@Qslaptop (and other excited folks), I think that there is a disconnect in basic assumptions here. Let me offer you some information:

<Snip>

I will freely admit that the persistence facts are counter-intuitive, but there is no statistical data that refutes them..

Yep, seen that before and agree with it. No mutual fund is going to beat the market every single year. Or even five years out of ten (I'm guessing.) But when it does top the index, what is the margin of victory? That cumulative effect can add up over years.

However, my data assumes you buy a particular manged mutual fund and hold onto it for a period of time. You start with a dollar amount in year "X" and by year X+5, or year X+7 or year X+10, or X+15 check and see how much money has accumulated.

It's the average annual return compounded over time that makes the difference.

Run the numbers yourself. Pick some endpoints. I think you would be surprised.

Try running TRBCX, T. Rowe Price Blue Chip Growth over the past 3 or 5 or 10 years. Or Fidelity OTC Fund. Or Fidelity Blue Chip Growth. Or Fidelity Defense and Aerospace. Or Fidelity Biotech Sector. etc. etc. The managed funds are out there that beat the index. There has to be winners to offset all the losers index proponents say are out there.

 

[Qs Laptop]

So, how do I know which Am funds to buy today with no-load ( or even a load ) that will beat the total market index 5 years from now? 10 years from now?

You can't know.

Or do all or a great majority of Am funds routinely beat the total market index over five and ten years?

No. There are better funds than American Funds to choose from.

Maybe I am missing something, but I still think the results are cherry picked, unless most or all of their 18 or so equity funds routinely beat the index.

The ten year period as chosen is a bit skewed because it includes the crash year of 2008 as year one. That's a handicap that is hard to overcome. However, if you look at what the index lost in 2008 and what the index gained back in 2009 and then compare to some of the American, Fidelity, or T. Rowe Price funds that particular two year average is not kind to the index funds.

But still, go out 11 years, go out 12 years, 15, 18, whatever. Quality managed funds beat the index, especially the longer you hold them.

 

[pb4uski]

....But still, go out 11 years, go out 12 years, 15, 18, whatever. Quality managed funds beat the index, especially the longer you hold them.

Not only are you wrong, but you are hopeless too.

 

[Qs Laptop]

Not only are you wrong, but you are hopeless too.

Have you run the numbers?

 

[MRG]

Kevin M. is this you?

 

[OldShooter]

Yep, seen that before and agree with it. No mutual fund is going to beat the market every single year. Or even five years out of ten (I'm guessing.) But when it does top the index, what is the margin of victory? That cumulative effect can add up over years.

However, my data assumes you buy a particular manged mutual fund and hold onto it for a period of time. You start with a dollar amount in year "X" and by year X+5, or year X+7 or year X+10, or X+15 check and see how much money has accumulated.

It's the average annual return compounded over time that makes the difference.

Nonsense. S&P understands arithmetic.

Run the numbers yourself. Pick some endpoints. I think you would be surprised.

I'm not going to waste my time. This is a settled question. Beginning 50 years ago: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=244153

Try running TRBCX, T. Rowe Price Blue Chip Growth over the past 3 or 5 or 10 years. Or Fidelity OTC Fund. Or Fidelity Blue Chip Growth. Or Fidelity Defense and Aerospace. Or Fidelity Biotech Sector. etc. etc. The managed funds are out there that beat the index. There has to be winners to offset all the losers index proponents say are out there.

The problem is not that there are winners. There are always winners. But "offset?" As Sharpe explains, the average delivered to customers is inevitably below the benchmarks by the amount of fund costs. That is not just mutual fund fees. It it trading cost and the fact that a fund buying or selling moves the market and hence loses by that as well. Your using the word "proponents" implies that there is some question about the conclusion. There is none. It is simple arithmetic.

The problem for investors is that there is no way to identify winners in advance.

Here's another graphic for you, not that it will matter:

​

This feels like debating with a flat-earther. Eugene Fama and William Sharpe have Nobel prizes. What are your credentials? Published papers in the field? Tenured professor in finance? ... ??

 

[harley]

There are no fees other than the load. The load varies depending on the amount invested.

Less than $50,000, load is 5.75%
$50,000 to $100,000, load is 4.25%
$100,000 to $250,000, load is 3.5%

In my case I was over $100,000 so at the 3.5% break point. For me, I beat the indexes with my investments in New Economy and Amcap since I got into them in 2009, 2010, and 2013.

There were fees if you had to buy the funds through an advisor until a couple of years ago. Plus there are always management fees/expense ratios. Just a glance shows the expense ratio for the New Economy fund as .78%, vs the .14% for the VFINX fund that it compares to. That's all I was talking about.

 

[flintnational]

Have you run the numbers?

You have not addressed the ad posted by American Funds, the topic of this thread. You have introduced new funds, New Economy, and offered data and time periods not included in the ad.

We all agree. You can find funds and dates that beat the S&P, just not the funds listed in the ad in the 1, 5 and 10 year periods per American Funds own data and clearly stated in the ad. (They are not even trying to hide the under performance.)

And without an introduction or posting on any other thread, some might come to the conclusion you are only here to promote American Funds. Fair enough. But, you could at least use the 1, 5 and 10 year data supplied by American Funds in their ad.

 

[pb4uski]

Probably a troll

 

[Qs Laptop]

There were fees if you had to buy the funds through an advisor until a couple of years ago. Plus there are always management fees/expense ratios. Just a glance shows the expense ratio for the New Economy fund as .78%, vs the .14% for the VFINX fund that it compares to. That's all I was talking about.

I bought several American Funds through Edward Jones. The only fees I paid were the load fees.

Annual return numbers include the expense ratio fees.

 

[Qs Laptop]

You have not addressed the ad posted by American Funds, the topic of this thread. You have introduced new funds, New Economy, and offered data and time periods not included in the ad.

None of the funds listed in the ad beat the index fund when the loads were included.

We all agree. You can find funds and dates that beat the S&P, just not the funds listed in the ad in the 1, 5 and 10 year periods per American Funds own data and clearly stated in the ad. (They are not even trying to hide the under performance.)

Great, that's what I'm saying.

And without an introduction or posting on any other thread, some might come to the conclusion you are only here to promote American Funds. Fair enough. But, you could at least use the 1, 5 and 10 year data supplied by American Funds in their ad.

I'm not promoting American Funds. I just sold most of my holdings in them when I went to Fidelity. I did keep New Economy and New Perspectives.

I found this forum yesterday and noticed this thread. It just happens that I had ran numbers on American Funds vs. the index several years ago and had just run the numbers on Fidelity Funds vs. the index as a prelude to my moving my money to Fidelity. I thought I'd jump in with some data.

 

[Qs Laptop]

The problem for investors is that there is no way to identify winners in advance.

You're right. Better not to try and just settle for the market average.

Here's another graphic for you, not that it will matter:

​

Hmmm...I see some managed funds outperform the index funds. Well, that's where I try to be, so that's where I'm going.

This feels like debating with a flat-earther. Eugene Fama and William Sharpe have Nobel prizes. What are your credentials? Published papers in the field? Tenured professor in finance? ... ??

Appeal to authority.

 

[Qs Laptop]

Probably a troll

You have said: "I am wrong. I am hopeless. I am a troll."

I see you have over 17,000 posts on this board. Nice to meet you.

 

[flintnational]

Still no response to the 1, 5 and 10 year under performance American Funds clearly states in their own ad.

 

[pb4uski]

For the record, I said "probably" a troll. Over 17,000 posts and I have not put anyone on an "Ignore List".... yet.

 

[harley]

You're right. Better not to try and just settle for the market average.

Hmmm...I see some managed funds outperform the index funds. Well, that's where I try to be, so that's where I'm going.

OK, that's fine. How do you pick the ones that are going to beat the index over the next 10 years? That's the part I can't do. I think anyone would choose to beat the index if there was a guaranteed way to do it. But there's not, and the odds (as shown by the chart) aren't very good. So yes, settling for the market average is good enough for me.

Nevermind, I found it. Here's the list. Interestingly, none of them are American Funds. More interestingly, IMO not a single one of them should be comparing themselves against the S&P 500. And they all seem to have fairly high expense ratios.

I'm still interested in what technique you are going to use to pick the funds that are going to beat the market for the next 10 or so years. Past performance? Good luck with that one. It's possible, and the odds are better than winning the lottery. If you have another technique, I'd be curious to know what it is.

 

[flintnational]

OK, that's fine. How do you pick the ones that are going to beat the index over the next 10 years? That's the part I can't do. I think anyone would choose to beat the index if there was a guaranteed way to do it. But there's not, and the odds (as shown by the chart) aren't very good. So yes, settling for the market average is good enough for me.

Easy. He mentioned earlier he originally had these funds at Edward Jones. They will tell you which funds are going to out perform! Problem solved. Although that does bring up the question whether Ameriprise's recommendations will out perform Eddie's recommendations. Oh well, you still have a decision to make. Gosh if only there was a way to avoid all these decisions and just participate in market returns at a low cost.

 

[Qs Laptop]

Still no response to the 1, 5 and 10 year under performance American Funds clearly states in their own ad.

http://www.early-retirement.org/forums/f44/am-funds-ad-better-than-index-91084-5.html#post2024486

 

[MRG]

You know AFS has had good years and many advantages to their customer base. Much of it seems to me to be dated for the last century.

Their regional processing centers were great when you did business via paper. Your mail was optimized. Their relationship with ED was a great thing, call or drive to my local ED Jones office, conveniently located in most small towns if you wanted to initiate a transaction.

This all changed last century, now after being in the business for 88 years they've discovered no-load funds, and other channels. By 2050 they may have index funds too.

People should do their own research and make they're decisions.

One question, what is the Vanguard, Fidelity and Schwab anti-hack protection worth to you? AFS doesn't have one.

 

[OldShooter]

You're right. Better not to try and just settle for the market average.

I prefer to think of it as adopting a strategy that will, over 10 years, outperform over 90% of investors including, in all probability, you. Before you start pounding on the keyboard again, review the Ken French video: (https://famafrench.dimensional.com/v...-managers.aspx)

Listen carefully to what French has to say about "rents." To slightly expand his point: In the highly unlikely event that there is someone with actual skill sufficient to beat the market he is not going to be stuffing himself into a suit every day, commuting to an office building, and selling his expertise for a few basis points. He is going to be relaxing on a tropical island drinking from a glass garnished with an orchid, taking an hour every once in a while to do a few trades when the checkbook gets low. There is zero chance he will be available to retail investors.

Hmmm...I see some managed funds outperform the index funds. Well, that's where I try to be, so that's where I'm going.

Wow! What brilliance! The difference between you and several of us here is that we know that such a strategy cannot be successful except through luck. From this dialog I wonder if you will ever figure that out. American Funds is hoping you won't.

Appeal to authority.

IOW, you don't have any qualifications. Or maybe an "Introduction to Excel" course at some point?

 

[samclem]

There has to be winners to offset all the losers index proponents say are out there.

Yes, every year some managed funds will beat the applicable index. It is generally a small number, smaller even than would be expected by mere chance (due to their costs and other factors). What OldShooter and others have been trying to say (with words and some very good links) is that it not possible for you or anyone else to reliably identify the future winners. Again--it is not possible to do it with any reliability. You might just do it, for awhile, but it will be luck.

I will freely admit that the persistence facts are counter-intuitive, but there is no statistical data that refutes them..

It is incredibly counterintuitive. I am sympathetic to the viewpoint of "Q's Laptop" because I used to hold the same views. When I first started investing (before the public interwebs ), I would peruse the "Best Funds" lists produced by Money Magazine, Kiplingers, even Consumer Reports (no kidding). I'd find funds with good recent and long-term records, then invest in them. Like choosing a car or a toaster--find a company that offers a good product with long-term reliability, then buy it. It was a long time before I read "A Random Walk on Wall Street" or heard about Fama, French, Bogle, etc.
It turns out that there are a lot of really good reasons that choosing a fund isn't like buying a toaster. But that's not obvious to the general public, even very smart people. In what other realm of modern human endeavor can massive resources spent on/by highly educated and dedicated people, using very sophisticated technical tools produce--nothing? Keeping up the appearances that skill can produce superior results is essential to support a very lucrative industry, so we can expect that the ads will continue.

 

[MRG]

^^^^

Well said, yesterday's winner is tomorrow's dog.

I relearned the lesson last 2-3 years. A great fund manager, Buffet praised him, another mentee of Graham. Manager with a long term track record of great performance..... a private fund who's visibility was limited to "it's mostly the same as....." For 30 years of my personal experience, this fund was juicy.

I was only using it for plan B before 59.5, so just another year. What could go wrong? The fund manager was generating a great return. Remember a guy named Martin Shkreli? Yeah well, unbeknownst to me, I was heavily invested in Martin's biotech crap. It was a 150k lesson.

 

[OldShooter]

... I am sympathetic to the viewpoint of "Q's Laptop" because I used to hold the same views. ... I'd find funds with good recent and long-term records, then invest in them. ...

Yes. Absolutely. I remember sending a check to a guy in Kansas City, Kurt Lindner, to invest in his highly recommended fund. This was probably 40 years ago. I tell people that I am a slow learner. It took me almost 30 years to figure out that no one in the investment business knew anything useful. Maybe that is why I sometimes spend too much time trying explain to others what I have finally learned.

 

[flintnational]

Have you run the numbers?

By the way, welcome to the forum. You might want to introduce yourself at the Hi I am....... link.