Mutual Funds

[azanon]

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Also, why is nobody else posting in here? :% Nobody else here has mutual funds?

They're probably afraid you're going to slander their funds, like you did mine.:dude:

 

[Guest]

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You guys are too funny! I don't have any mutual funds currently, but my new lady is going to give me her 401K information and let me play with it. IF anyone has any advise, I'll gladly accept. My only experience now is with TSP funds. I'm assuming there will be transaction fees with her 401K, so I wouldn't want to buy-sell too often correct?

 

[Rolo]

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mlk_man wrote:

I'm assuming there will be transaction fees with her 401K, so I wouldn't want to buy-sell too often correct?

It depends, but probably won't. All of my transactions that I have made are free. I do not have enough experience nor huge amounts of money to move around to ignore fees. Plus, any tax-advantaged funds spent on fees would be a waste of that advantage.

Az, I'll reply when I am finished laughing, haha.

 

[Rolo]

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azanon wrote:

Help you do what? Not sure i understand that, lol, but I am havin fun. :^

hehehe, ya, this is fun and in-person would be a riot, I bet. I like pilsner, you probably like stout.

Help pick killer funds. Not that average crap, either. :l

azanon wrote:

I prefer 3years. Didnt I say that before? Going back more than 3 is not as good.

Yes, you did...somewhere in that tirade about how awesome Janus and Maisco was in the '80's or whatever. You just needed some Thompson Twins playing in the background. I got distracted by flashbacks of Anthony Michael Hall movies. Hel-lo! Welcome back...He's doin' The Dead Zone now...lol

Okay, so, putting our draft together, we agree on a 3-year history. I take it you treat all three years equally, or do you give any weight to more recent performance?

azanon wrote:

Looking at 3 months or last years winners is a typical ameteurmistake, because last years winners are quite often this years losers (cause theyprobably took risks toget there and possibly now own overvalued securities). Yet that'swhat you lookat.You're getting a present day lesson onthis conceptwith REYFX, aye?

"possibly now own overvalued securities" - There is probably a lot of truth to that. However, my present day lesson still leaves me with twice as much cash as you! Money talks, so STFU....hehehehe...j/k.



azanon wrote:

Treating investment categories as mutually exclusive is a mistake, in my opinion. There are some investments out there that the collective majority thinks are poor investments (options, commodities, precious gems, artwork). The risks never justifies the returns. If morningstar rated these, they'd all get "one star". In contrast, there are investments that the risk is more than justified (common stocks).

Agreed. But the M* ranking does not take that into account. They specifically list risk/return and rate the two separately, and encourage users to pay attention to those instead of stars.

azanon wrote:

You can evaluate as broadly as above, or within stocks themselves, but comparing apples-to-oranges with your investment money is one of the wisest things you can do, cause the smart investor wants "maximum return" with the "least amount of risk" to get it, regardless if he has to, (god help us all), step out of a precious asset class. If you, instead, box yourself into a specific investment class (say, you want an internet fund) from the get-go, chances are you've already lost.

I wanted most of my portfolio to be Internet funds last year. Two of mine had a 100% return for 2003. Since I bought it in May, I made 100% in 9 months. I sold them this January, knowing that the best was likely over for a while. I have a very small position in Internet funds. I have it in my Internet company's SEP IRA. Also, Internet and technology I know best. When Peter Lynch hears "router" he would think of carpentry and that is why he missed the 18,000% cisco gain. I, however, am Cisco certified and even posess some Cisco equipment. Plus, tech is so hated, and that is frequently a good reason to invest in tech. My "tech" now is oil. Black Gold. Texas Tea. I wish I had jumped in it sooner. (One personal goal: To stop saying, "I wish I had jumped in sooner."!)

Sectors change for many reasons, and one of them is that they are cyclical. Sure, one can just stay invested in everything and they will always have something performing well to offset the lagging industries for fairly consistent growth. Since I am in a musical mood, I will mention something an old girlfriend said to me, "Superman's Dead. That's you." The chorus of that Our Lady Peace song, "Ordinary is just not good enough today". She understood me very well, very quickly, which is impressive.

My point is that if I am going to invest this much time into it, I want superior results and superior results is why I invest more time into investing. Plus, I get bored easily and I need to tweak and tune my investments to my satisfaction. My portfolio is not just an investment or my retirement. It is something that I have assembed and built, and I like to see it run. People who frequent investment forums such as this one may have a similar take.

azanon wrote:

Oh I read with precision. My mistake was assuming you knew i meant morningstar ratings. I assumed you knew that I meant morningstar ratings since these are the specific things you see everywhere, such as on mutual fund ads, and the like. That is what they are famous and well known for. Everyone has stock evaulators like the one you're using at M*.

Oh, sorry, my bad. I overestimated your intelligence then. (baha, ouch) You mean you take mutual fund ads seriously? Good G-d man!

Anyone with a working basic understanding of mutual funds understands that you cannot lump all mutual funds into a singular cookie-cutter rating of 1 through 5. That would be like rating all motor vehicles 1-5: SUVs, subcompacts, light trucks, exotic sports cars, all under the same star rating system. That simply would not work, but you could do it. Different vehicles have different objectives, different roles, different purposes. In any case, my PT Cruiser would have more stars than your Rex, so you would have to buy one. :u

Last year's winners you say? According to Morningstar's own data, of the 4- and 5-star rated funds in 1998, only 46% of them held their rating one year later, and only 31.5% retained their ratings in 2000.

"Past performance is no indication of future results" is not merely a legal disclaimer, it is a reality. Star ratings are based on past performance--that very thing you find "wrong" with my fund-picking. I look for trends, not historical performance. The fact is, 1-star funds historically had better performance than 5-star funds one and two years following those ratings, probably for the reason you stated. The Journal for Investment Consulting released studies on it, since you bashed Ric Edelman. Funny, you would agree with everything else he says, I'm sure.

azanon wrote:

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I fired a financial planner because she used "four- and five-star funds".

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You pay for a financial planner? Ouch. [/align]

I was starting out and I wanted something to keep me in check and to help ensure I didn't miss anything. It ended up being another reminder of why I am a misanthrope. :?

azanon wrote:

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Personally, I am not one who does not dislike volatility outright. In fact, I like volatility. I like risk.

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That volatility in and of itself is bad, is quite honestly not even a matter of debate. The things one should consider when considering any investment are its 1. stability of principle 2. stability of interest3. total return 4. protection against inflation 5. tax benefits (or lack thereof) Lowering, any of these, is a bad thing if it isnt offset by another factor(s) rising. Volatility, by its very defintion, cause #1 and often #2 to be lowered, but doesnt necessarily guarantee #3 will increase, so "liking" it in and of itself, is, with all due respect, a mistake.

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I like getting paid for taking those risks, as that is the whole premise behind any investment. Risk/Performance ratings are necessary in finding that sweet spot on the risk/return graph.

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[align=left]You get paid if the risks translate into higher returns, but that is not always true as I have addressed above. "Risk/performance" is morning star ratings so make up your mind, do you like it or do you not? (performance=return).[/align]

1-2 Punch:

1. You merely repeated what I had said. You cannot split my paragraph and try to refute my argument by eliminating the context. That tactic is akin to starting the bilge pump. :s
2. It wouldn't be called "risk" if it were guaranteed, now would it?

BAM!

(hehe, Alzar is on Futurama right now.)

azanon wrote:

[align=left]Marsico focus is 5 star for 3 years, and USAA AG is almost a mirrorimage ofthat fund (compare the holdings list if you dont believe me). I keep checking my explanation on this for clarity, and it seems clear to me. In what way am I failing to help you understand this?[/align]

1. Stars belong on little children's foreheads. :*
2. Both of those funds are craptacular.

azanon wrote:

[align=left]Gratz on finding last year's winner, and one of the worst funds i think ive ever seen. The fluke was 03' and what you can expect is everything else. I hate to see you lose your money. If my harshness contributes to you eventually selling this loser, then I think I did the greater good .[/align]

Shooooosh! My inclination to ditch REYFX is the reason I started this thread. I think I will replace it with stocks, though.

My owning REYFX is one of the reasons why I will be running 13's in my PT Cruiser before you in your STi. :u

 

[Mike]

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For funds, I would recommend the Vanguard index funds. The rates of return are decent in the long term, and they provide some of the lowest fees around. Fees are incredibly important, since just a 1% difference can eat away many thousands of dollars in a few years - thus nullifying any advantage you might get out of a stronger-performing fund in the short term.

 

[tsptalk]

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Welcome Mike! Thanks for the info.

Tom

 

[Rolo]

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Welcome, Mike!

I hate average. The more I trade stocks, the less I like funds. Especially index funds.

So far, my index-predicting leaves a lot to be desired (read: sucks ) since I have not followed indexes until recently. My stock predicting is another story, they always do much better than the indexes. Today, for example, the NASDAQ is :{2.2%, S&P500 :{0.8%, Wilshire 4500 :{1.27%.

My stocks, from largest to smallest positions, are VLCCF :}5.2%, TASR :}0.5%, NAT :}3.3%, TNP :}0.3%, XMSR :{2.0%, SIRI :{3.7%.

Funny, I have been feeling that I should have sold the last two last week, but I convinced myself that I am holding them for the "long term". Perhaps I should rethink that and trade in and out of it like I have other stocks.

XMSR has a nice pattern and I think it may break out, but thenegative EPSmay preclude that; it is hanging by a thread in my portfolio. SIRI was steady and today's drop was a surprise; I never expected it to drop below $3.

Anyway, back to my point. I hate average and do not wish to settle for it. If I, as a newbie, can trounce the market, I certainly expect a professional to do so. However, after reading Peter Lynch's book, I think SEC regulatory encroachment may make consistent outperformance very difficult. (The book did not directly give me that impression, but a glimpse into how fund managers must operate caused the inference.)

I would gladly pay a premium fee to get superior results. I have never gotten ahead in anything by going on the cheap; in fact, the few times that I have skimped, it cost me. On an average day, I'll definitely pay 2% for a 20% return rather than 0.2% for an 11% return.

I have one fund left in my regular brokerage account, REYFX. Its downtrend seems to have ceased, so I will hold on a while longer, however, I do not see myself buying another fund to replace it. I still have funds in my IRA's and am entertaining the thought of transferring them over to Scottrade for some serious tax-deferred trading.

Basically, I am looking for compelling funds to give me a reason to not actively trade in my IRA's.

 

[Mike]

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The high fee funds want you to think that they are delivering higher quality. However, studies have shown the opposite to be happening. Quite simply, it's a rip-off in many cases. When you are talking about tens of thousands - or perhaps hundreds of thousands of dollars, just a slight bump up in fees can really take a bite out of your retirement earnings. If you wish, I could track down some very well-written articles on this subject and post the links. I'd certainly consider them recommended reading for any investor.

If you don't want to go the Vanguard route, my next suggestion is to look at Morningstar's site. They have a very handy ratings system that tells you which funds are doing well and how they rate compared with each other in fees and other things (such as short-term / long-term performance).This allows you tofind both performance and low fees, which is the best of both worlds.

Of course, most of these things have a pretty sizable minimum investment requirement, so as a young investor, I can't take advantage of them - yet.

I'm generally not a big fan of stock trading - unless you really know what you are doing, you can easily get burned on it. Plus there's the trade fees and commissions to deal with, which pretty much force you into buying/selling a lot of shares at once to make the transaction worthwhile... which means greater risk.

Edit: sadly, the articles I read are now in the online archives and cost $2.95 to view each one.

However, here is a recent one that is free. The site may or may not ask you to register to view it, though.

http://www.twincities.com/mld/twincities/business/columnists/gail_marksjarvis/8978869.htm?ERIGHTS=-2604827108238647492twincities


Basically the author makes the point that index funds are beating 80% of active mutual fund managers (the stock pickers). She also mentions something interesting that you may be interested in: exchange traded funds (EFT's). These are index funds that can be traded like stocks, andsome of theseencompass smaller portions of the economy (like biotechnology). Some food for thought.

 

[cougarcash]

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I like the Ariel Appreciation Fund (CAAPX) and especially the Ariel Fund (ARGFX). I've had the Ariel Fund for years and have been pleased.

 

[Rolo]

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I'll look at those two tomorrow.

Today I did what I should have done two months ago. I exchanged RIAFX for RSCOX and RSNRX (RS Contrarian and RS Natural Resources). My other holdings in my Roth are DRBNX (I thought biotech would grow by now, but wait...for...it...) and RSPFX. I think I need to spend some time doing a refresh on it.