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nope not at all and that is why the comparison between the two is something i am very interested in watching.
How would the ETF portfolio be doing absent international and commodity funds? I ask this because you are presenting a good argument on the construction of your portfolio and the type of funds you put in. My mistake was in thinking this was a passive v index discussion. I agree that right now international and commodity funds are a weight as you demonstrate. One of the good things about the newsletter is their current absence of international small cap and other than the select portfolios commodities.
...the argument for indexing & lower expenses has never been that it's MORE IMPORTANT than timing or allocation--I don't believe I've heard anyone here suggest that. Rather, it gives you an additional edge that can end up being very significant over the long term, regardless of whatever else you do. Sure, an investor can screw up those other things, and the impact of that will likely be too much for lower expenses to make up for, but he likely would have made the same bad moves investing in more expensive (actively-managed) funds ANYWAY...
Well said! If I had access to a predictive tool that (1) I trusted, and (2) was largely correct, then it would be sensible to avail myself of that tool, even if the fees were high.
For several years I've overweighted my portfolio in international (and especially European) indices. They were low-cost and tax-efficient. If I did the same with actively-managed funds, my returns would have been even worse, because fees are charged in good times or bad. If however I stuck with US large-cap index funds, my returns would have been better. They would have been only slightly worse had those US large-cap funds been actively-managed funds. This is because of the large spread in long-term returns between European and American equities. No amount of investment-efficiency could overcome that spread.
If I paid - via newsletter subscription fees and annual fund-costs - for good advice, the payment would have been worthwhile. But Mathjak's 25+ years of experience notwithstanding, many of us mistrust the claims of any predictive tool. We've seen too many counterexamples.
Now if only I'd been more skeptical of the European system and more enthused about the US equity market for the past 20 years....
nothing really predictive about it other than just nudging the portfolio to follow the big picture better. a tweak here ,a tuck there but basically nothing really predictive going on.
right now the big picture says inflation is not an issue and europe is on the edge of another recession. rates on bonds still have a while to hold steady.
just adjusting for that has made all the difference in the performance between what i actually use and the etf model which i am beta testing for possible use.
but many of the funds we use have no etf equals and so you can't get a apple to apple comparison .
what i do know is whatever model i go with i do not want to have to 2nd guess myself all the time or always be contemplating my next move which is what i do if left to my own devices. so it is either buy and hold that diversified etf mix and just letting it ride , or continue with the newsletter which keeps me from myself, is actively managed but not by me calling the shots.. that discipline has worked wonders through some of the most awful times we have had.
Last edited by mathjak107; 11-02-2014 at 09:30 AM..
Once again everyone is right in this discussion. As a index and active investor who uses the newsletter I can appreciate the realities of each argument. Who is the Fidelity Insight best suited for? A person who has a wide range of Fidelity funds within their work place savings plan and has a wide variety of funds available. Fidelity has a wide range of relatively low fee active funds( many dogs) and that means no load charges etc and no annual charges etc etc. Buying and selling funds don't bring about charges and the only selling cost are short term trading fees if applicable. Fidelity has a core of solid decade in and decade out funds that even if they miss their mark on a short term basis outperform over the longer term. Several that come to mind are Growth Company/Blue Chip Growth and Contrafund. They have different investment goals and the newsletter helps to incorporate funds into a well rounded portfolio of 5-6 funds that don't overlap and that's the key thing. Many Fidelity funds are similar and trying to sort them out on your own difficult. The newsletter tracks and interview fund managers and incorporates changes in fund managers into their recommendation. Are they always right? Heck no but is the overall performance of the portfolios a winner? Yes more often than not. Their portfolios are constructed for varying investment goals and it is easy to have several portfolios with different goals. Index investing provides simple fund construction with 3,4,5,6 fund portfolio recommendations widely available. It is simplicity and effectiveness in one package. The use of the newsletter in a tax sheltered account is not going to have the tax consequences as if used in a taxable account as there will be no capital gain consequences when trading. There will be different tax consequences when actually reaching the promised land and selling for profit. That's why the tax sheltered portfolio will have a much larger emphasis on bonds etc etc. My workplace plan has over 190 Fidelity funds in it and all of the index funds are Advantage class funds regardless of the amount invested. The newsletter evaluates all of the Fidelity funds and gives monthly ratings on each with recommendations of what to buy independent of the portfolios. Where the Newsletter becomes steller is in assisting with the actual construction of your portfolio. Joe Smith has a classic three fund index portfolio of Total Market, International and Intermediate Bonds. As the climate of international changes and it has they stay the course. The newsletter dropped International funds and if Draghi drops a QE hammer soon that might change. However any recommendations will include the timing of end of the year fund distributions etc etc because they track all of that for you.
One example of when their timing was good was with the Large Cap Value fund. Not much to write home about over a decade but during one of the corrections after QE ended they included it in one of the portfolio's and as the market rebounded it shot up about 30% in less than a year. As it neared its peak they took it out of the portfolio and that 30 percent gain became more normal and declined a bunch. Newsletter followers saw the gain and not the short or long term negative performance. A lot of that was based on the actual stock holdings within the fund and their ability to ride the market back up. Again buying and selling the fund in a tax deferred account triggered no fees or anything. One of the great things about the portfolios is they key them to volatility with each portfolio having a different volatility target. It provides simplicity of portfolio construction with out targeting the entire range of domestic, international equity and debt. It provides the ability to sort through all of the Fidelity funds many of which aren't very good. I can tilt my overall portfolio using both passive and index funds with simplicity and direction. I have a favorite small cap fund and hold small caps in both non tax and taxable accounts. If I want to cut back on small caps it is easier to do it within my workplace small cap index and not my taxable fund that is a long term keeper. I stay with my former employer account because it is so good and has liability protection Bogleheads board we will find a few index investors with Wellington or Wellesley or perhaps both.
vanguard has a few newsletters too. it really is all about the discipline more than predicting.
I know but Fidelity has over twice the number of family funds with more overlap, confusion and resources to craft portfolio composition with. Yes not about prediction and more about selecting and avoiding to frequent selection with bad timing and choices. The newsletter makes mistakes but tries to balance risk appropriately with fund selection. Bogle in his books does a great job discussing market composition and translating that into fund selection. Thus the ease and simplicity of index funds and capturing all of it. How to weight that capture? That's the beauty of the individual and their decision making.
vanguard has a few newsletters too. it really is all about the discipline more than predicting.
Discipline means resisting emotional sway (greed or fear) to avoid stupid moves. "Predicting" means, to quote mathjak, "nudging the portfolio to follow the big picture better".
If I have access to trustworthy and correct advice about the big picture, then this is something actionable. If I learn that my house is situated in a flood-plane, the consequent action is to buy flood-insurance, even if that insurance is expensive. There's nothing to "nudge" if our conception of the big picture is murky, erroneous or too abstruse. And if there is something to "nudge", well, that's acting on a prediction.
I can be disciplined in buying and holding forever, never selling in the worst bear market, never gorging on yesterday's winners in the best bull market. That's discipline. But it is inferior to genuine actionable knowledge, where somehow I learn which sector will lead and which will lag.
The trouble is that the aforementioned knowledge is astonishingly rare, if not outright impossible. If somebody places in front of my nose a prediction that turns out to be presciently correct, I still would not believe it. My best recourse is therefore to discipline. A smarter and more agile man might have been able to profit from prediction.
for decades one could buy a 50/50 mix or 60/40 mix and sit and hold it for just about what seemed forever.
after all bonds were in a bull market for more than most of the time most of us were investing more than 35 years to get to this level. . buy and hold was just fine.
but today is a new era . with rates just about as low as they can go and really have no where to go but up ,buying and holding a portfolio with total disregard for the obvious at some point may not be the best way to go anymore.
things at this point have to be more dynamic than ever before with a combination of high stock valuations and low interests rates. that is a combo that never existed in the past.
the past saw interest rates averaging 5-6% and a down turn of 15% saw an investor recover froim interest alone in about 2 years.
well the only thing that repeats itself is historians as each time life plays out just different enough.
going forward my opinion is portfolios will need some fine tuning and tweaking to fit the times better.
portfolios could be hurt once rates start to rise back towards their historical norms. if indexing becomes even more popular the same stocks will be bought more and more driving them to points of severe over valuation while the rest of the market may be where the value is.
no one knows but i think portfolio managment going forward will need just that ,some sort of management and direction to fit what is obvious in the bigger picture that lies ahead.
Last edited by mathjak107; 11-02-2014 at 06:18 PM..
Discipline means resisting emotional sway (greed or fear) to avoid stupid moves. "Predicting" means, to quote mathjak, "nudging the portfolio to follow the big picture better".
If I have access to trustworthy and correct advice about the big picture, then this is something actionable. If I learn that my house is situated in a flood-plane, the consequent action is to buy flood-insurance, even if that insurance is expensive. There's nothing to "nudge" if our conception of the big picture is murky, erroneous or too abstruse. And if there is something to "nudge", well, that's acting on a prediction.
I can be disciplined in buying and holding forever, never selling in the worst bear market, never gorging on yesterday's winners in the best bull market. That's discipline. But it is inferior to genuine actionable knowledge, where somehow I learn which sector will lead and which will lag.
The trouble is that the aforementioned knowledge is astonishingly rare, if not outright impossible. If somebody places in front of my nose a prediction that turns out to be presciently correct, I still would not believe it. My best recourse is therefore to discipline. A smarter and more agile man might have been able to profit from prediction.
with very few exceptions all portfolios are predictive in nature. in fact most folks have their portfolios weighted for only the good times meaning low rates and rising stock markets.
what about the other 3 major scenerios:
recession
depression
inflation-hyper inflation.
with mostly all equities and corporate bonds in their portfolios even those who think they are being non predictive are being predictive.
one of the few non predictive portfolios would be on the order of the permanent portfolio concept.
long term bonds,equites,cash ,gold in equal amounts.
that will react and make money in mostly all outcomes with the intention of not being a barn burner in the up years but protective in nature.,.
with most catagories falling about 50% typically in worst case scenerios anything that is that bad has the other assets soaring.
2008-2009 saw that as an up year as long term treasuries soared 45% and gold was up and that overcame the drop in stocks.
the point is most buy and hold investors think they are not being predictive in nature but by the very structure of their portfolios are far more predictive than they think. what they really are doing is just not reacting to things or protecting against other scenerios than prosperity if they play out .
whether things turn out good or bad by not reacting does not negate the fact they only weighted those portfolios for prosperity and that my friend is predictive..
Last edited by mathjak107; 11-03-2014 at 03:08 AM..
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