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You probably have heard the term “a stock pickers market” at some point in your investing career or if you are just starting, you will at some point. It is especially true in volatile markets like we have in 2022 and definitely had in 2021. In 2021, according to the SPIVA report, it was a great year for growth stocks. The S&P 500 Growth Index was up 33% but 98% of all growth managers failed to outperform that benchmark. Take it out “long term” and 90% of all domestic equity funds underperformed the S&P Composite 1500 Index over the past 20 years. As a result of these facts, mutual fund managers like to counter with a claim that on a risk-adjusted basis they will outperform. Once again, this is simply not true. According to the SPIVA report, 95% of these same managers underperformed their benchmark on a risk-adjusted basis over the same 20-year period – so much for that claim.
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Think about when the calendar turns a new year. The investment community parades out all their strategists, analysts and economists with their predictions for the upcoming year. Which stocks, growth or value, which sectors, technology or healthcare, are going to outperform over the next 12 months...
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Yet Mr. Hochachka found that, “any other relationships between turnover and returns are similarly not borne out consistently across the various categories over time. Over this [30-year]period, high turnover does not hurt fund performance. Nor, however, does it enhance performance
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Someone once said, the only way to make a lot of money on Wall Street is to start a mutual fund. Ever look at the Forbes 500 list of the wealthiest people in the world – you might be surprised to see how many hedge fund managers, money managers, and venture capitalists are on the list. Why are ...
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Why is that? Maybe it’s because, if you actually follow their predictions, you’d realize just how wrong they are. LCM Capital Management (LCMCM) likes to call them “annual guesses.” The word “guesses” sounds unprofessional, but the reality is, that is what they are. Do yourself a favor and stop p...
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The reason the industry does not believe in actual long-term investing is because it tends not to generate fees. When money is in motion, it generates fees and fees are good for business but not always good for the investor or client, especially over the long-term. Gene Hochachka, from Frontier F...
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S&P Dow Jones Indices just came out with their annual SPIVA Survey on the performance, or should we say underperformance, of active mutual fund managers versus their stated benchmark. Like the Forbes 500 l...
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So if trading within your mutual fund does not help performance, what does? Stock picking, market timing, risk adjusted returns?
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You probably have heard the term “a stock pickers market” at some point in your investing career or if you are just starting, you will at some point. It is especially true in volatile markets like we have in 2022 and definitely had in 2021. In 2021, according to the SPIVA report, it was a great y...
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So why is this the case? Academics have known for decades that active stock pickers underperform, according to an article from CNBC’s Bob Pasani where he references this SPIVA report. W...
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Jack Bogle, the deceased founder of Vanguard once said , “Before costs, beating the market is a zero-sum game. After costs, it is a loser's game." "Fund performance comes and goes. Costs go on forever.”
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2021 was a great year for growth stocks. SPDR S&P 500 ETF Trust SPY an ETF that tracks the performance of the S&P 500 index was up 33% but 98% of all growth managers failed to outperform that benchmark. Take it out “long term” and 90% of all dome...
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The financial industry loves to talk about long-term investing, but what is long-term? Well, according to the IRS, long-term is 12 months and 1 day. Anything less than that is considered short-term from a tax perspective and taxed at your ordinary income tax rate.
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He looked at the data from 1991-2020, i.e., long-term. The average annual turnover for US Large Cap funds was 73%. To put this in perspective, 100% turnover means the portfolio is traded (turned over) completely in one year. So, 73% is approximately three quarters of the portfolio turned over eve...
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This dismal performance however does not take into account all fees and costs. Yes, the performance figures from the report are adjusted to include fees but not the mutual fund loads, if any. Yet what about the fees you are paying your advisor or broker?
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The reason the industry talks the long-term investing game, but doesn’t walk the walk, is because, according to the SPIVA report, of the funds that have been around for 10 years, 86% of them underperformed their benchmarks. Not exactly something to be bragging about, wouldn’t you agree?
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Mutual Funds - The Great Rip-Off
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According to Warren Buffet, if you invest in a very low-cost index fund over time, you'll do better than 90% of people who start investing at the same time. To start, Buffet advises to put 10% of the cash in short-term government bonds, and 90% in a very low-cost S&P 500 index fund.
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