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It's Not Your Fault Your Fund Can't Keep Up

Good news: The Standard & Poor's 500-stock index is up 12.6% (including dividends) for the year, one of the best first quarters in a long, long time. Many stock analysts are projecting a banner year for stocks, as investors pile into the market to counter today's low interest rates and fears that bond prices may be soon tumbling.

Bad news: Some of the biggest funds just aren't keeping up. The $59 billion large-cap American Funds Investment Co. of America Fund (AIVSX) was up 11% for the quarter. The story's similar for the $54 billion American Funds Washington Mutual (AWSHX), up just 7.7%, and the $37 billion Vanguard Windsor II fund (VWNFX), up 12.4%.

The really bad news: There's nothing unusual about any of that. A Morningstar survey for The Wall Street Journal Sunday found that only eight of the 25 largest actively managed funds—all types, from bond funds to foreign—beat the S&P 500 for the quarter.

That's right in line with previous analyses. On average, fully two-thirds of mutual funds lag behind their respective benchmarks, according to Morningstar. (Such studies stacked bond funds against bond indices; and stock funds were compared to stock indices.)

And over the long haul, according to fund guru John C. Bogle, virtually all fail.

Why does this happen? And what can you do about it?
 
MrJohnRoss said:
It's Not Your Fault Your Fund Can't Keep Up

Good news: The Standard & Poor's 500-stock index is up 12.6% (including dividends) for the year, one of the best first quarters in a long, long time. Many stock analysts are projecting a banner year for stocks, as investors pile into the market to counter today's low interest rates and fears that bond prices may be soon tumbling.

Bad news: Some of the biggest funds just aren't keeping up. The $59 billion large-cap American Funds Investment Co. of America Fund (AIVSX) was up 11% for the quarter. The story's similar for the $54 billion American Funds Washington Mutual (AWSHX), up just 7.7%, and the $37 billion Vanguard Windsor II fund (VWNFX), up 12.4%.

The really bad news: There's nothing unusual about any of that. A Morningstar survey for The Wall Street Journal Sunday found that only eight of the 25 largest actively managed funds—all types, from bond funds to foreign—beat the S&P 500 for the quarter.

That's right in line with previous analyses. On average, fully two-thirds of mutual funds lag behind their respective benchmarks, according to Morningstar. (Such studies stacked bond funds against bond indices; and stock funds were compared to stock indices.)

And over the long haul, according to fund guru John C. Bogle, virtually all fail.

Why does this happen? And what can you do about it?
Click to expand...

Bogle says hold a total market fund (Wilshire 5000) plus invest your age in bonds. So, a Bogle like porfolio for a 50 year old would be 50% total stock market index fund and 50% total bond market index fund. Buy it, hold it, and forget about it. :)
 
Happy Trails said:
Bogle says hold a total market fund (Wilshire 5000) plus invest your age in bonds. So, a Bogle like porfolio for a 50 year old would be 50% total stock market index fund and 50% total bond market index fund. Buy it, hold it, and forget about it. :)
Click to expand...

Personally, I doubt I'll ever hold much in the way of either bonds or stock mutual funds. I'm working on getting to the point where I'll be mostly holding dividend paying stocks for a higher yield and a much better chance at portfolio growth. I'll probably do a bit of market timing well into my retirement years too. But that's just me.
 
Looks to me like the $VIX has put in a bottom. Can you say "cup and handle"? Maybe this week will bring the handle...

$VIX.png
 
MrJohnRoss said:
Personally, I doubt I'll ever hold much in the way of either bonds or stock mutual funds. I'm working on getting to the point where I'll be mostly holding dividend paying stocks for a higher yield and a much better chance at portfolio growth. I'll probably do a bit of market timing well into my retirement years too. But that's just me.
Click to expand...

Not what I'm doing either but it is what Bogle would probably say about the question "What can you do about it".
 
Cramer is liking restaurants this evening - all I need is a half point more on my LUB and I'm even. You and I seem to have a similar strategy as far as building a portfolio with an income stream for life.
 
Birchtree said:
Cramer is liking restaurants this evening - all I need is a half point more on my LUB and I'm even. You and I seem to have a similar strategy as far as building a portfolio with an income stream for life.
Click to expand...

Cramer. pffffft. He's full of hot air, and not much else.

That being said, people are gonna eat, drink sodas, smoke cigarettes, buy band-aids, candy, beer, soap and all the "basics", no matter what the economy is doing.

LUB is looking strong, esp in this declining market. Looks like you'll do good.
 
4-Year Cycle Approaching Crest?

"... The most important feature is that the current cycle is about three years old, and prices are approaching a very strong level of long-term resistance just above 1500. All things being equal, it is reasonable to assume that the 4-Year Cycle (and prices) will crest later this year, probably in the area of when 6-Month seasonality switches to bearish at the end of April... "
 
Looks like small caps are really getting crushed. Just got a chance to get to my computer to make a trade. I'm betting a little more on the downside....

Bought 190 shares of TZA @ 20.60.

Good luck everyone!

TZA.png
 
AAPL is currently in the $630ish price range. Help me with this logic...

A lady I know does not want to sell her shares, even though she suspects it will go down, because her avg cost was $385, and she thinks those shares are (in her words) "irreplaceable".

Wait. If AAPL is at 630, and you suspect it might go down to.... let's say 500, just for the sake of argument.... are you telling me you wouldn't sell your shares because you bought them at $385???

So you're willing to lose 20% on your holdings? Why does this make sense to this person? Is it an emotional attachment?

Why wouldn't you sell your shares at $630, wait for the plunge to $500, then re-purchase the same number (or more) shares? Why would you NOT want to avoid taking a -20% bath?

Does this person's logic make sense to anyone? :confused:
 
She likes apples? I have no idea. people are strange. I would hold them. I think next year apple TV will take the stock much higher.
 
There is the question of capital gains taxes. Perhaps she has already made her profits in another equity. It's all in the timing.
 
MrJohnRoss said:
Looks like small caps are really getting crushed. Just got a chance to get to my computer to make a trade. I'm betting a little more on the downside....

Bought 190 shares of TZA @ 20.60.

Good luck everyone!

View attachment 18522
Click to expand...

Depending on how the futures look in the morning I may try a quick hit and run on TNA. So far things are looking good, but as we all know it can change in a split second. If this market is done falling TNA is at a very nice buy in price from what I can see. Seems on March 6th TNA took a dive to this level and went up from there and we are back at that level of March 6th.

You and I will be going in opposite directions since it seems TZA is the opposite of TNA lol. I need to get my $50 or so back that I lost on Stevia somehow...maybe TNA will be the answer tomorrow. :)
 
JR, are you still holding onto your TZA position? I haven't bought TNA yet, but I probably should of bought some at the open...then again who knows how the rest of the day will turn out...
 
MaStA said:
JR, are you still holding onto your TZA position? I haven't bought TNA yet, but I probably should of bought some at the open...then again who knows how the rest of the day will turn out...
Click to expand...

Absolutely. A bounce was expected here. Wouldn't be surprised to see a "cup & handle" form on TZA and the VIX.

FWIW, I don't think we'll go straight back up from here. Unless the white house calls Bernanke and orders him to flood the market with some more stimulus. Aw, what's a few hundred billion more gonna hurt.

This might be a good day to buy TZA.
 
MrJohnRoss said:
Absolutely. A bounce was expected here. Wouldn't be surprised to see a "cup & handle" form on TZA and the VIX.

FWIW, I don't think we'll go straight back up from here. Unless the white house calls Bernanke and orders him to flood the market with some more stimulus. Aw, what's a few hundred billion more gonna hurt.

This might be a good day to buy TZA.
Click to expand...

Thanks for the input. I'm going to wait until later in the day to see how things are panning out. Do you know a good place that shows the upcoming news events such as earning reports for companies, etc (like Alcoa's release yesterday that was scheduled). I've here this month has a lot of earnings reports coming out, but where do you find out about these type of things in advance?

Thank you as always!
 
MaStA said:
Thanks for the input. I'm going to wait until later in the day to see how things are panning out. Do you know a good place that shows the upcoming news events such as earning reports for companies, etc (like Alcoa's release yesterday that was scheduled). I've here this month has a lot of earnings reports coming out, but where do you find out about these type of things in advance?

Thank you as always!
Click to expand...

News Viewer - MarketWatch
 
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