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I hesitate to bring this up about Fidelity Insight and mutual fund investing but here it goes. This is all a big IF and a big IF YOU WANTED to.
Mutual fund trading in violatile markets can make some folks have the urge to trade mutual funds on a more frequent basis. Fidelity like most companies have policies to minimize this and consider any purchase in and out of the same fund within 30 days to be a round trip that can result in trading restrictions. One of the things Fidelity Insight helps with is to enable you to identify and or avoid similar funds that just duplicate each other. One notable example is Growth Company and Blue Chip Growth. Growth Company is closed to new investors and Blue Chip Growth is the recommended fund in its place. If you have been around long enough to own Growth Company and also buy Blue Chip Growth you can trade into one and out of the other in a 30 day period. With so many trigger days and events occuring SOME might want to use this vehicle as a hedge against and or for. With trading having been in range for quite some time and the highs and lows being somewhat predictable within a few percentage points SOME might consider Insight a good tool to guide them in pairing funds. SOME might say you could do this with small cap and a host of other funds. I guess there are some individuals who might find this to be a thought, however I am sure most won't. Right?
overlap on your own is a big problem. ever notice how many folks own an s&p index fund and a total market index fund. the total market fund is 95% driven by the s&p 500 index.
Most large cap funds end up being s&p driven as well.
having a good newsletter that knows the funds well avoids much overlap. you can buy 2 very different funds on your own with different styles represented by their name only to find much overlap in the holdings.
Last edited by mathjak107; 08-08-2012 at 08:27 AM..
You really cant use index funds as the funds in the models are chosen because the managers weight them in certain directions .
as an example when we had a weak dollar export and multinational was the place to be. as it looked like the dollar was strengthing we shifted to another fund where the manager weighted in a direction better geared for a strengthing dollar...
neither fund beat the s&p index alone but by utilizing the sweet spots at different times they both beat it working together.
if you want to index then index but dont try to duplicate something that you cant. good or bad you cant duplicate the managers strategy , the holdings of the funds and the goals of the funds.
copying the returns of a model through indexing can have very different results in the volatility to achieve those returns.
fund managers are always making decisions about what to do,where to go and how much cash to hold. index funds dont do that.
indexing is great in up markets or in down markets that recover. they can be one hell of a ride when things dont recover so fast as there is no hope of a fund manager protecting the fund.
the disaster in 2008 worked out good for indexing as markets recovered quickly . actively managed funds were in protective mode and lagged on the recovery.
it would have been a totally different out come for indexing if we went lower and stayed lower for an extended period of time.
it makes no sense to subscribe to something you are not going to follow. just get a newsletter geared to etf models.
Last edited by mathjak107; 08-08-2012 at 02:29 PM..
it makes no sense to subscribe to something you are not going to follow. just get a newsletter geared to etf models.
well, i believe its a 3 month trial so we will see.
but i couldnt help but notice that when you go to the fidelity web site to research the mutual funds you can see the returns compared to whatever index they wish to be compared to. for the most part, the returns are either less than the index or close enough that the additional fees would make up the difference. so it just got me thinking, maybe i think too much.
ive been looking back and forth at the funds and the indexes and they seem to lag the indexes for the most part and then with the fees you could yield another .5+% annually. you could still stick with them as far as holding onto the etf's and only trading when they say so, you would just hold the equivalent etf instead of the fund.
it was just something i thought about and started looking at how they compare to the indexes, i feel if they are comparable then you get an automatic boost through lower fees.
maybe you are less fickle than i am but i think mathjak has a point about mutual funds putting a brake on itchy trigger fingers which can happen with etf,s
i bailed out of the spanish bank santander last thursday after what i thought was bad news out of europe , the stock has been tanking since i bought it in april but it has done 10% since i sold last friday morning , im not saying etf,s are inferior ( they are usually cheaper ) but a lot of people allow emotion to take over , its important to pick the right mutual fund however , something like four out of give mutual funds fail to beat the market indexes , fidelity and the likes of vanguard wellington are top funds however
the vanguard welsely mutual fund has excellent results this past five years , as does the wellington , i plan to put some money in one of theese funds soon as im tired of trading theese markets this past few months, made some money but im not cut out for the stress , will maintain a small selection of individual stocks like apple , a few blue chip british companies like glaxowsmithkline , tesco and two french large caps , france telecom and total , i also have a few irish companies which i know well , the rest is going into a mutual fund for two decades , want to put the whole thing to bed and ignore it
well, i believe its a 3 month trial so we will see.
but i couldnt help but notice that when you go to the fidelity web site to research the mutual funds you can see the returns compared to whatever index they wish to be compared to. for the most part, the returns are either less than the index or close enough that the additional fees would make up the difference. so it just got me thinking, maybe i think too much.
thats why i say beating an index isnt a strategy.. its the entire portfolio working as a unit that beats the index not the individual pieces.
you can have 4 mutual funds that dont out perform the s&p index. but by utilizing them at different times to exploit there strengths and avoiding their weakness at times the sum is greater than any one of them.
think about the permanent portfolio concept with only 25% in equities out performing the s&p index which is the very same index that could be the entire equities part of it.
it beat it for the last 25 years on average by almost 1/2%. what the small equity stake didnt do it in the upmarket it made up for in the down market .as other asset classes ran with the ball upward at the same time the index was falling more gains were made..
as an investor for more than 25 years i can tell you after about my 3rd year i gave up looking at performance comparisons.
i wanted to grow my money but i wanted to do it with a certain comfort in mind.
to this day i have no inclination to stop using the newsletter guidance even though i think i could put together my own mix of etf funds that would out perform theres.
but its not just about performance.
i devote 30 seconds a week to my multi 7 figure portfolio. thats it. i have nothing to do but read an e-mail every friday and see if i have to click away a fund and buy a different one.
no decisions, no pondering, no second guessing myself, its all short and sweet and not a thing for me to ever think about.
my time now is spent learning about retirement planning and life and helping others on forums but no time is spent on my own portfolio at all .
getting good results and not devoting much time : priceless
.
Last edited by mathjak107; 08-08-2012 at 05:07 PM..
maybe you are less fickle than i am but i think mathjak has a point about mutual funds putting a brake on itchy trigger fingers which can happen with etf,s
he definitely has a point, im just throwing the idea out there to see if it makes sense and possibly could make an extra fraction of a % (which adds up over time). im not saying to trade more actively or hold anything for shorter period of time than the newsletter says, just to try to find the index "equivalent."
i can definitely appreciate the peace of mind and less work of putting it in someone elses hands for a small monthly fee rather than either doing it yourself or paying a higher fee to a professional.
id be curious to see a portfolio of index funds someone has put together to see its returns.
id be curious to see a portfolio of index funds someone has put together to see its returns.
One of the most popular/simplistic core funds is the three fund portfolio (total stock market/total bond market/total international). It doesn't slice and dice. Just low cost funds that represents entire markets.
extremely successful because of the following:
Covers every style and box in Morningstar
No Manager risk/drift
No Overlap
Low turnover
Simple to rebalance
Never underperforms the market mathematically certain to outperform most investors
costs me nothing in $$ to allocate myself
Simplicity
I use Vanguard. Some use Fidelity....etc..
You don't have to equal weight into all 3 funds. It depends alot on what your puker factor is.
This is just one road to Dublin which is extremely successful. Some people slice and dice. Some use newsletters w/low cost funds....
im more in the camp of good portfolio design beats all .
the flip side to just indexing is :
never beat the markets
no protection in extended down turns
you are held capitive to that index and what they hold, indexes are weighted and a hit to one stock can destroy an index. apple and google account for 29% of the nasdaq QQQ .
IF ANYTHING DRAGS THEM DOWN YOUR SUNK. active funds may not even own much if they are performing badley but the index is stuck until voted out..
very easy to mis-match investments
very easy to have to much over lap if you dont know what your doing ala the most popular error ,a total market fund and an s&p 500
stress of making all the decisions yourself
second guessing yourself
unable to find some very useful funds simply because they dont exist outside of managed funds. an example is while there are high yield index funds there is nothing that matches fidelity capital and income. a fund that invests in not only high yield bonds but actively buys distressed companies as well. great fund when you want something more than a bond fund without the volatility of a full stock fund.
no way is better than any other way, its all about you ,your goals, your stomach for risk and the effort you want to make taking responsibility.
the one thing i dont like about indexing is it breeds a false sense of not only diversification but it over simplifies the portfolio construction as if it requires nothing more than a few different types of index funds covering different syles and locations.
to many folks who look at just costs and put these mixes together end up not doing as well even after expenses because getting assets to play nice together isnt as easy as the bogle heads think..
look at all those who thought having indexes of foreign stocks, real estate ,corporate bonds and domestic equities was being diversified. well as everything plunged they found out they really werent.
there were assets that did perform as expected in that down turn and did well but rarely are they bought or held in enough quantity to make a difference when their day in the sun comes.
more emphisis on portfolio construction and less on indexing and following the indexing herd would have brought gains even in 2008 or at least a whole lot less in stress for those who never imagined such drops because they thought they were diversified .
what were the winners? gold and long term treasuries it turned out this time were the only true diversification when we were headed to hell.
i think going forward the key to success long term is going to be all about " reducing the volatility of volatility"
the problem is prior to 2000 if you were happy with a 60/40 mix the barclays aggregate model had a plus or minus of about 10% swings . well today that model has swings 2 to 3x that amount. thats far more than mot folks signed on for and so they flee and are out of the game with losses.
going forward the key to success will be finding ways to temper that volatility, whether its insurance products ,options, or even funds that are doing it actively managed on their own but this new normal has really blew the doors off what used to be and the investment portfolios and styles that were used.
watching every penny of costs going forward in a poorly designed mix for the times may be like rearrainging the deck chairs on the titanic.
in my opinion anyone who chooses to go the investment route on their own better learn all they can about what it is they are buying, how it correlates to the other stuff and how it all fits into the big picture. they have to stop believing because they think they covered all the major food groups by some of the oversimplified indexing ideas that they are protected and good to go .
that ride to whatever long term return you get may be a very rough ride down the road and your vehicle may not take well to the bumps. there are other roads that are far smoother that can get you to the same point and thats what good portfolio construction is all about.
Last edited by mathjak107; 08-09-2012 at 02:58 AM..
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