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I don't understand how people don't beat the index. I guess it must be REALLY LONG beginner's luck...
Is it because people aren't willing to research for a while and find good stocks or that they're not willing to take a little risk?
The previous decade returned approximately 0% annually. Pat yourself on the back if you beat that by yourself, I rather like Yacktman's 12% annualized 10 year returns.
returned 0% on what? perhaps large cap stocks but mid-caps rose 50%, small caps were up, gold was up 400% and long treasury bonds did very well,reits were up too for the decade .
in fact if you had a well balanced portfolio it was actually hard to not be up. some portfolios and funds had nice returns over the decade.
Last edited by mathjak107; 09-14-2010 at 05:42 PM..
The supposedly most representative of the whole market, the SP500 was 1500 10 years ago, 1120 today, a -2.89% return annualy.
The SP 400 (MID) midcap index was 432 a decade ago, 778 today, 6% annualized.
Russell 2000, the small cap index, was 480 in 2000, 650 today, a meager 3% annualized over 10 years.
Gold is an oddity, returning about 17% since 2000, but don't forget its erratic performance, like its run up to 850 in the early 80s, only to crash to 400 pretty soon after. Over 15 years, it has returned 8%.
So math, let's assume someone allocated 25% in midcaps (6%), smallcaps (3%), gold (17%), and bonds (6.5%). For all of the diversifying and time spent, and because gold had a run, you would have had an 8% return. Better than flat, but I wouldn't say it's worth the effort considering there are many mutual funds without transaction fees that have done better. The complexities of balance sheets, technologies, black swans aren't fair for average joe schmoes to compete on the level with guys that are dedicated to the job.
But if you're like an engineer at Apple and you know you've got killer technology, why not.
8% grows an amazing amount of money compounded. we would all take that anytime going forward.. the dow is only representative of large caps. most of those indexes are all less dividends so you have to add another approx 2%...
the thing is that they are all stock... like i always say a simple mix of equal amounts of gold,cash,long term treasuries and a total market index fund rebalanced once a year would have given you a 9.2% cagr for over 30 years now.
the indexes dont include rebalancing as well which increased gains this decade nicely and that in its self made me whole again in this debacle. even though the indexes are off their high..
the indexes also force you to take the best and worst of a funds performance.
the portfolio i use that uses actively mnaged funds will utilize a certain fund at a certain point in the economy and suck the best out of it , when the big picture starts to change those funds are exchanged for other funds geared better for whats happening so you are always getting a little better performance out of a fund before it gives some back
that particular portfolio is up since 1987 1200% , 100k is now 1.2 million and not only is it a bunch of nothing special funds but its all done for me by following a newsletter that caters to fidelity funds.
the point is there is alot more money out there that was made then simple indexes indicate because good portfolios require more than simple indexes of stock in times when the economy sucks .
we had 2 back to back recessions in this decade so the equities markets are merely the messenger .... if you held only equities this decade you had some tough winds against you.
in the old days equites were the only game in town ,you could buy any diversified fund and get more then 8% cagr most likely but those days are over. it takes alot more asset classes, it takes a plan that forces you to rebalance when you want to run and hide and buy more of whats dropping and like steering a big ship you need to be able to switch actively managed funds into other areas that may work better against the big picture as it changes so you dont ride an index up and then back down .
when the dollar was weakening one of our funds was fidelity export and multi-national ..as the dollar strengthened we went to fidelity blue chip growth, as things needed to get a little more defensive we went to fidelity new market income. thats only a fund in a group of funds that make up the portfolio and is an example of how the funds dont have to beat the indexes but your portfolio does.
for the decade from 2000-2009 the s&p was down about -8%....the newsletter growth portfolio was up just shy of 40% over the same time frame. since 1987 its up 1200% and thats with only 75-80% of the risk of the s&p. remember risk vs reward is important. all equities and indexes is 100% risk. beating that by 50% this decade with only 75% of the risk is even better then the numbers show.
Last edited by mathjak107; 09-15-2010 at 03:17 AM..
The supposedly most representative of the whole market, the SP500 was 1500 10 years ago, 1120 today, a -2.89% return annualy.
The SP 400 (MID) midcap index was 432 a decade ago, 778 today, 6% annualized.
Russell 2000, the small cap index, was 480 in 2000, 650 today, a meager 3% annualized over 10 years.
Gold is an oddity, returning about 17% since 2000, but don't forget its erratic performance, like its run up to 850 in the early 80s, only to crash to 400 pretty soon after. Over 15 years, it has returned 8%.
So math, let's assume someone allocated 25% in midcaps (6%), smallcaps (3%), gold (17%), and bonds (6.5%). For all of the diversifying and time spent, and because gold had a run, you would have had an 8% return. Better than flat, but I wouldn't say it's worth the effort considering there are many mutual funds without transaction fees that have done better. The complexities of balance sheets, technologies, black swans aren't fair for average joe schmoes to compete on the level with guys that are dedicated to the job.
But if you're like an engineer at Apple and you know you've got killer technology, why not.
actually if you bought gold at that all time peak in the 80's if you had a plan that included rebalancing the cagr for your gold today is 9.2% vs doing the same thing with the s&p500 on the same day and getting 9.8 cagr.
its all about the plan and not just buying stuff and measuring date to date that makes things work. a good portfolio should always perform better then just the sum of most of its parts tracked date to date.
you mentioned the meager returrns : everything is relative to what returns are from whats going on at that time and at what risk level..
even 4% beat cd and money market rates over that time so in comparison you did fine. but even so equities takes at least 15 years to perform in my mind so check again in 4 more years.
a 401 keg plan would have worked the best. just collect empty beer cans the last decade and return them for deposit. you would have beat the s&p 500 ....
Last edited by mathjak107; 09-15-2010 at 04:38 AM..
What are your opinons on these four funds by Vanguard.
VWINX
VTINX
VBISX
VASIX
I don't know about VTINX and VASIX. I'm not a big follower of the "life strategy" or "target retirement" funds. I think they're overkill. On first glance, it seems like VASIX has decent long term returns.
However, I think VWINX is the best of the bunch you listed. Great long term returns with low volatility and low expenses. True, it's actively managed and may not repeat its success....but the low expenses give it a good chance of doing so.
VBISX....if you must be in bonds right now, I think short term bonds are where you need to be. Interest rates can't go too much lower from here, IMO. If you have a longer time horizon, I think a medium term bond fund such as VBIIX is better. But you've got to have that 5 year time horizon...and even if you have a long time horizon, it might be better to switch to VBIIX after interest rates go up, which they will eventually.
His flagship mutual fund has been blessed, gaining 20 percent this year and 59 percent in 2009. That was some 32 percent better than the S&P 500, according to Morningstar, a fund rating service.
"Yacktman has been an excellent manager who has had lots of success wherever he has been," says John Coumarianos, an analyst with Morningstar.
His Yacktman Fund has easily outpaced the S&P 500 over one, five, 10 and 15 years. For example, his recent 15-year number was 11.10 percent a year, some 3.35 percent better a year than the S&P 500.
Yacktman Focused Fund 11.35%: 1-year return 12.01%: 10-year return
By the way, when I say I'm a fan of balanced funds, I mean a balanced strategy, not necessarily balanced between stocks and bonds. Like I said before, I think investing in gold, large caps, technology, municipal, treasuries, or the flavor of the day is short sighted, when you could just invest in a fund that has done well through thick and thin. So on the bond side, I'm a fan of Pimco Total Return, as they steered clear of risky debt in 2008 and piled into mortgage bonds as the government stepped in.
Thanks for the link. I've heard of the fund. I knew it was good, but didn't realize it was that good. That said, it is a concentrated fund....which is great if as long as you're not losing money. But there's always risk there, although it's 2008 performance was also impressive.
I don't know about VTINX and VASIX. I'm not a big follower of the "life strategy" or "target retirement" funds. I think they're overkill. On first glance, it seems like VASIX has decent long term returns.
However, I think VWINX is the best of the bunch you listed. Great long term returns with low volatility and low expenses. True, it's actively managed and may not repeat its success....but the low expenses give it a good chance of doing so.
VBISX....if you must be in bonds right now, I think short term bonds are where you need to be. Interest rates can't go too much lower from here, IMO. If you have a longer time horizon, I think a medium term bond fund such as VBIIX is better. But you've got to have that 5 year time horizon...and even if you have a long time horizon, it might be better to switch to VBIIX after interest rates go up, which they will eventually.
i use fidelity short term bond, fidelity investment grade bond, vanguard vfidx intermediate term investment grade and fidelity new market income for the fixed income portion of my mix.
right now deflation is a bigger worry then inflation so i dont see rates rising for the immeadiate future right now . .
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