Avoiding Fidelity's transaction fee on TICRX

[LOL!]

Yep, you gotta know bad data and charting when you see it or you will end up buying funds like TICRX.

 

[Boho]

Compare funds in the Fidelity mutual fund compare tool to see the adjusted gains over various periods.

I did and compared it with an unadjusted chart but I either rationalized the difference or decided I wanted the fund anyway...

Yep, you gotta know bad data and charting when you see it or you will end up buying funds like TICRX.

I just used Fidelity's compare tool to compare the adjusted gains for TICRX with the S&P from 2007 to the present and TICRX outperforms the S&P from 2007 to 2012 while the S&P outperforms from 2012 to present. From 2007 to present, the S&P outperformed by...I think it's 1%. It was one of the best socially responsible funds I found. I guess PRBLX is better but it wasn't mentioned here for some reason so I didn't know about it.

 

[RobLJ]

The solution to being unable to break things down so a novice could understand is to either learn to do so or avoid dealing with novices, not being an ass.

Ian's post upthread pretty much breaks down the issue of distributions. This is the main reason why most fund price graphs are worthless, particularly for funds with meaningful distributions, which are usually active funds, particularly those that change positions significantly year over year (i.e. turnover).
I learned to look at the performance tables, although that took longer to figure out than it should have.
Fidelity funds usually take distributions in mid/late December; I nearly had a heart attack looking at the price chart of a large holdings one year when the effect of distributions on fund price was particularly dramatic--I think the distribution was almost 10% of the fund price. Not fun if you don't know what's going on!

 

[Boho]

Dos and Don'ts for Mutual Fund Capital Gains Season

But one thing is for sure: If you're considering adding a fund to your portfolio--or heavily bulking up an existing position--and a fund is forecasting a large capital gains distribution, consider holding off on your new purchase until the distribution has already occurred. Otherwise, you'll be paying taxes on gains that you weren't on board to enjoy.

Now I think it would have been good to consider that big drop from the distributions like I was going to. Buying when you see a recent, uncorrected drop like that could mean that you have a fairly long wait for the next distribution, if not that it's a value. A sort of correction comes over time as other funds have their distributions. As it gets more corrected, it gets closer to the next distribution and becomes a worse time to buy. I didn't exactly know what was happening but it would have turned out good. Buying when prices are low turns out to be good no matter the reason for the low prices. If you buy any other time, then you have to worry about when the distributions are.

 

[samclem]

I just used Fidelity's compare tool to compare the adjusted gains for TICRX with the S&P from 2007 to the present and TICRX outperforms the S&P from 2007 to 2012 while the S&P outperforms from 2012 to present. From 2007 to present, the S&P outperformed by...I think it's 1%.

Boho, if you are comparing funds like this (comparing their performance over 5 year periods, etc) and trying to decide which to buy based on that, you are unlikely to get a good result. I say this as someone who used to do the same thing. Or, I'd look at Consumer Reports, which took the same approach. The market conditions during those 5 year periods were different enough that the performance differences are based strictly on the type of funds each of these are, rather than any inherent stockpicking skills of the managers.

It was one of the best socially responsible funds I found.

Editorial comment: When we invest in a "socially responsible" fund, we will be paying a higher management fee than if we bought an index fund. They will, in general, underperform the index fund (due to these costs, and due to the requirement that they may have to disregard some well-performing stocks). The "socially irresponsible" stocks you didn't buy will be bought by somebody else (maybe me!), hardly affecting the price of these stocks. In aggregate, we can do our "causes" more good by just investing for maximum risk-adjusted returns and donating funds to the causes we support.

Boo, I recommend The Bogleheads Guide to Investing. A good intro into the low cost index investing style.

+1. A very good book.

 

[RobLJ]

I don't question the wish to purchase socially responsible funds, although the warning on underperformance is pertinent.
Personally, I don't buy tobacco, liquor, or "defense" stocks in the stock portfolio, although I wouldn't tell others they have to copy my behavior and I'm willing to tolerate it in broad-based mutual funds (so I'm a hypocrite).
Donating, however, (at least to ease your conscience) is a bit like buying a papal bull in the medieval period or maybe bribing your undertaker.

Editorial comment: When we invest in a "socially responsible" fund, we will be paying a higher management fee than if we bought an index fund. They will, in general, underperform the index fund (due to these costs, and due to the requirement that they may have to disregard some well-performing stocks). The "socially irresponsible" stocks you didn't buy will be bought by somebody else (maybe me!), hardly affecting the price of these stocks. In aggregate, we can do our "causes" more good by just investing for maximum risk-adjusted returns and donating funds to the causes we support.


+1. A very good book.

 

[Boho]

Boho, if you are comparing funds like this (comparing their performance over 5 year periods, etc) and trying to decide which to buy based on that, you are unlikely to get a good result. I say this as someone who used to do the same thing. Or, I'd look at Consumer Reports, which took the same approach.

I cross check in several ways. I think each way matters.

The market conditions during those 5 year periods were different enough that the performance differences are based strictly on the type of funds each of these are, rather than any inherent stockpicking skills of the managers.

You shouldn't assume that.

Editorial comment: When we invest in a "socially responsible" fund, we will be paying a higher management fee than if we bought an index fund. They will, in general, underperform the index fund (due to these costs, and due to the requirement that they may have to disregard some well-performing stocks).

I've heard that. In general. In general I'm willing to accept reduced profit so I don't help the bad guys. In the case of what I bought, it seems to perform better than the S&P. See this. I bought an index fund and now I have second thoughts because this socially responsible fund seems to perform better.

The "socially irresponsible" stocks you didn't buy will be bought by somebody else (maybe me!), hardly affecting the price of these stocks. In aggregate, we can do our "causes" more good by just investing for maximum risk-adjusted returns and donating funds to the causes we support.

I'd like to read a study on that. I'm not willing to assume that's true.

+1. A very good book.

I reviewed this webpage to choose the book I bought. I was disappointed by the choices, but it's a good resource for choosing an investment book. The choices are what they are.

 

[samclem]

I don't question the wish to purchase socially responsible funds, although the warning on underperformance is pertinent.
Personally, I don't buy tobacco, liquor, or "defense" stocks in the stock portfolio, although I wouldn't tell others they have to copy my behavior and I'm willing to tolerate it in broad-based mutual funds (so I'm a hypocrite).

I don't try very hard to talk people out of "socially conscious" investing. It makes them feel good (which is nice) and when they go that route it actually benefits me:
1) Assuming the active managers are digging around to find the best stock values, it helps keep the market efficient and benefits my index funds. Active investors pay for the research that makes indexing work, and I appreciate it.
2) To the degree (however tiny) that their avoidance of "immoral" companies reduces the stock prices of these companies, it allows me to buy the dividends of those companies for a lower price.

The criteria used to screen companies for these funds are worth a look and, often, a laugh. Parnassus eschews investments in companies that make electricity with nuclear power, but elctricity generators who use coal are fine. They won't invest in Sudan, but they have no specific prohibition against investing in Iran, Syria, or , I guess, North Korea.

Donating, however, (at least to ease your conscience) is a bit like buying a papal bull in the medieval period or maybe bribing your undertaker.

I'm pretty sure Altria (aka Phillip Morris) isn't materially affected if I don't invest in their stock. But, $10K invested in their stock 10 years ago would be worth about $60K today, compared to $20K if invested in the S&P 500. Altria >would< be considerably affected if I and other owners of their stock sent that delta, $40K, to support the efforts of antismoking groups, to fund antismoking efforts in foreign countries, to fund investigative reporting about how they market their product (esp overseas) and how they buy political influence in many countries. That would hurt them. Even just my $40K could go a long way in a country like the Philippines to reduce Altria's (and other company's) revenues and directly hurt the company (while helping those addicted to tobacco). I like the idea of using any ill-gotten profits against a company, and believe it would be a more effective strategy than just avoiding the stock (if a person wants to do good rather than just feel good). Influencing the stock price of a company is a very indirect and inefficient means of "hurting" the company. Reducing their revenues (reduced tobacco sales) and especially profits (highlighting legislative sweetheart deals that keep cigarette prices high) are much more effective.

 

[samclem]

In the case of what I bought, it seems to perform better than the S&P. See this. I bought an index fund and now I have second thoughts because this socially responsible fund seems to perform better.

One timeframe. One unique set of market conditions. Scores of "socially responsible" funds and you cherry-picked one that, retrospectively, did better than one particular market index. Most "socially responsible" funds didn't outperform broad market indices. Most active funds don't, either, despite their best research and efforts. Buying the best performing active fund of the previous time period (1,5,10 years) is a virtually certain ticket to disappointing future returns.

I bought one though. A Random Walk Down Wall Street. But I feel like I get the point without even opening it.

The book you bought, "A Random Walk . . .', is a true classic. From your posts, it's obvious that the points the book makes (which are excellent) have not made an impact on your thinking or behavior. You apparently feel you "get it", but you do not. Spend some time with it and I think you'll really benefit. Monkeys, darts--Malkiel has put it all right there, and it's true. The points he makes have been repeatedly proven in the decades since the first edition was published. You'll save a >ton< of money if you take that book to heart, and then look to "A Bogleheads Guide to Investing" for the brass tacks of how to implement this philosophy. Don't be impatient to make investments right now, take a few weeks to build a foundation for a lifetime of decisionmaking and action.

 

[Boho]

You apparently feel you "get it", but you do not. Spend some time with it and I think you'll really benefit. Monkeys, darts--Malkiel has put it all right there, and it's true.

I won't blindly favor broad market index funds over other funds. Actually, I think everything I own is an index fund of some sort but the socially responsible ones have some exceptions and I combine several funds to make it broader, for example, I had too much large cap growth according to a Fidelity analysis so I just placed an order for MUNV.

I still haven't read any of the book but I've read of that same strategy online (bogleheads, etc.) and there are exceptions. Aside from the sacrifice I'm willing to make with the socially responsible funds, I want to identify the exceptions the right way and I think the numerous ratings and the performance history that I consider is a good method. If I find out I'm missing an element, short of something like reading the Wall Street Journal every day, I'll add it, but I won't blindly favor broad market index funds.

Parnassus Core Equity Fund (PRBLX) | US News Best Mutual Funds

Managers Todd Ahlsten and Benjamin Allen run screens to eliminate companies with significant revenue streams from tobacco, alcohol, weapons and gambling. On the positive side, they look for strong corporate governance and qualitative factors such as relationships with customers, vendors and employees.

The fund was established in 1992. Over the long term, the socially responsible growth strategy has returned more than the S&P 500. However, shorter time periods are generally more relevant to investors because there are likely very few who have held the fund for more than two decades.

Over the past 10 years, the fund returned two percentage points more than the benchmark.

Morningstar tracks the fund within its Large Blend category. On a 10-year basis, the fund handily outpaced its category average, and ranks second within that classification.

The fund has returned 14.16 percent over the past five years and 9.38 percent over the past decade.

^^^ I give things like that strong consideration.

 

[easysurfer]

I won't blindly favor broad market index funds over other funds....

I'd say the majority of us here that believe in broad market index funds aren't blindly following either but rely on studies, history of how well the indexes performed vs active funds.

I'm waiting for when after you've exhausted the other avenues, when you'll throw in the towel and say this indexing thing isn't so bad! Skeptics make the best believers ... in time.

 

[samclem]

I'm waiting for when after you've exhausted the other avenues, when you'll throw in the towel and say this indexing thing isn't so bad! Skeptics make the best believers ... in time.

It's an expensive way to learn, but some people will have it no other way. It took me a while to realize that selecting a mutual fund was entirely unlike buying a car or a toaster, and to admit that, while some managers might outperform for awhile, it was not possible to reliably find them in advance. That is a tough pill, and so different from other products we buy that I'm not surprised people reject the idea---at first.

 

[Boho]

I'll probably post my portfolio when I'm done creating it. I pretty much pieced together a decent index tracking portfolio. Probably higher-expense, lower bond than the average one on this forum, and I'm guessing just about as imperfect at indexing all the world's investments in the perfect proportions, but each fund is probably better rated by the standard measures.

 

[easysurfer]

It's an expensive way to learn, but some people will have it no other way. It took me a while to realize that selecting a mutual fund was entirely unlike buying a car or a toaster, and to admit that, while some managers might outperform for awhile, it was not possible to reliably find them in advance. That is a tough pill, and so different from other products we buy that I'm not surprised people reject the idea---at first.

Yes it is an expensive way to learn. I think many of us start out thinking we can outsmart the index when we end up outsmarting ourselves.

There was a time when I did the follow the hot performing funds to the tune of about 20 various funds, and not really having the time or knowledge to consider the variables.

For example, say if there is a guru fund manager who does outperform the market for the past five years, but decides to quit. Then what? That variable doesn't exist with passively indexing.

My time of conversion came about when a financial planner talked me into signing up for this market timing plan with my IRA. Computerized buy and sell signals of when to get in/out of the market. I spent nights worrying about my IRA and decided to read and discovered "What? there's such a things as just passively following the market and then outpacing the actives anyhow?" Plus, less time and work involved. Light bulb moment .

 

[Boho]

Fidelity's mutual fund compare tool may be good but their stock compare tool is annoying if you need adjustments for distributions. You could make the date of dividends appear (blue circles) but there's no indication of whether the graph is corrected for them. There doesn't seem to be a big drop at dividend payments. I plotted a red line from the date between payments to approximate a corrected graph. The blue line is the S&P. I believe this graph means the stock outperformed the S&P from April 2006 to the present. I do this so I can get an idea of whether a price is low for a random reason. If it's high for a random reason, I'll avoid it.

 

[samclem]

I do this so I can get an idea of whether a price is low for a random reason.

Lower than what?
I wonder if these prices are correlated with tides or moon phases? It would be good to get that on the chart.

 

[Boho]

Lower than what?

The S&P or an index in the relevant industry. I don't try to be perfectly accurate because there are too many variables, but I try to be somewhat careful. If there's nothing in the financial news to account for a drop in a certain stock, and it seems to drop, I'll consider it a value.

I need some small to mid cap stock, not to balance things as well as Fideliey's tools recommend (because I pay attention to recommendations from those who probably consider trends) but to not veer off too far. I'm considering picking stocks from the holdings of a mutual fund I bought. I'm not sure if I will though.

 

[samclem]

Good luck with this. You may have found a new hobby.