Comments on: Mutual fund charts of the day http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Anonymous http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/comment-page-1/#comment-9698 Tue, 08 Dec 2009 22:54:51 +0000 http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/#comment-9698 Try one little experiment. You always hear how the market returns 7% a year. Try to find a fund that has returned 7% a year for 40 years, a time commensurate with one’s probable working life. There are only a handful, and they are index funds. Think you can do better. Well, quit your job, play the market full time, subscribe to Bloomberg and every other information and evaluation service and see where you get. Odds are you’ll do no better than a full time fund manager. After all, that’s what you’ll be. Sure, you might do a lot better, but you also might do a lot worse. In that, it’s no different than playing the lottery, but good luck in getting that 7%.

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By: Joe S. http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/comment-page-1/#comment-9461 Tue, 01 Dec 2009 22:49:27 +0000 http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/#comment-9461 I think a lot of y’all are forgetting the Value Line effect and the early career of Warren Buffett, back when he was a stock picker rather than a conglomerateur.It’s pretty easy to argue that smart individual investors have enormous advantages over mutual fund managers. They are not accountable to slack-jawed investors on a quarterly basis, and don’t have to chase comparative performance. I’m quite willing to believe that they can beat the market.Of course, there are any number of fools who are also convinced that they can beat the market.

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By: mattmc http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/comment-page-1/#comment-9445 Tue, 01 Dec 2009 17:56:12 +0000 http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/#comment-9445 I found this line interesting: “We ignore funds that appear after September 2001 to avoid having lots of funds with short return histories.” Doesn’t that ignore a lot of funds with more positive returns while not factoring out the index funds that existed during that time?If everyone invests in index funds, instead of on fundamental value, won’t the stock market itself lose pricing information?Does the fact that I have made more money with foreign managed funds than in US index funds over a long time horizon mean anything here? Can this possibly hold true when it is a smart move is to hedge US inflation risk?

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By: Philip Rothman http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/comment-page-1/#comment-9420 Tue, 01 Dec 2009 05:06:14 +0000 http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/#comment-9420 Someone should point Justin Fox to this paper and blog post.

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By: Douglas http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/comment-page-1/#comment-9418 Tue, 01 Dec 2009 04:22:20 +0000 http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/#comment-9418 Aggregate underperformance after fees is a tautology. If you aggregate all managers (which, after all, outnumber the number of stocks) and subtract all fees (which of course have to pay expenses) you get the market less fees.What is more interesting is a). risk-adjusted returns; and b). persistence of under/outperformance. There the studies are far more equivocal. From the many studies I’ve seen it appears that 1.) risk-adjusted outperformance is very rare; and 2.) it happens. Identifying talent is hard–most RFPs focus on the wrong things to try to find it. But it can be found, and consistent stock-selection (not market timing and not style selection) is the most dependable way to get it.But try to find a stock-picker who can prove his worth.

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By: peatey http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/comment-page-1/#comment-9416 Tue, 01 Dec 2009 01:38:18 +0000 http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/#comment-9416 Fama and French have just proved that hedge funds are efficient at draining talent from the pool of mutual fund managers.Take a marketplace of buyers and sellers of the equity of large corporations, then subject it to the most heavy regulations designed to clip the extremes away, relax regulations on competition to hire away the best talent, take private the best outliers, let the smart money fly to derivatives and alternative assets, and then *marvel* at the amazing discovery that the remaining husk of investment vehicles seem to be “efficient.”Yea, verily, yet another great research by F&F.

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By: BH http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/comment-page-1/#comment-9415 Tue, 01 Dec 2009 01:33:38 +0000 http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/#comment-9415 This is the dirty little secret of the equities markets in the U.S. People who buy individual stocks or managed mutual funds will almost always under-perform the market over the time periods appropriate for equity investing. The entire financial media industry is built around promoting these vehicles, when in fact index funds are the only sensible approach. The fact that pension funds and school endowments speculate like this and squander money on ridiculous fees is scandalous.

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By: howard http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/comment-page-1/#comment-9409 Tue, 01 Dec 2009 00:01:14 +0000 http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/#comment-9409 james, excellent point, and let me add another (without, in any way, shape, or form challenging the core of our host’s position): to what extent did they subdivide a mutual fund’s results by manager.my recollection, for example, is that if you bought magellan the day peter lynch took the helm and sold magellan the day he retired, you way outperformed even after fairly significant fees. since then, of course, you haven’t….

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By: James http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/comment-page-1/#comment-9407 Mon, 30 Nov 2009 23:24:58 +0000 http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/#comment-9407 Seems to me that this paper/blog post both argue in favor of the EMH. Having studied under some very Efficient Markets Hypothesis-favoring professors, I’ve learned to find the unspoken qualifications to the arguments presented. One of the most unspoken points of any EMH discussion is what, exactly, constitutes “the market” in question? As Fama and French state, but do not elucidate, their study concerns US equity mutual funds. Even most active investors will agree that the US equity market is one of the most difficult ones in which to squeeze some advantage, particularly when the manager is constrained to a particular style (e.g. large value).A much more robust defense/rebuttal of the EMH would look at other markets. Of particular interest to me are riskier bonds and cross-border investments. Even further, a look at alternative investments (non-public funds) and styles (hedge funds or unconstrained managers) would be interesting. The problem with these other categories is that it is difficult to find the right model for what an efficient market would look like; it seems that the existence of any long-run positive returns in, for instance, a pairs-trading fund would be due to market inefficiencies.I’m no zealot for any particular point of view, but I’m glad for blogs such as yours to bring the discussion to life.

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By: Andy http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/comment-page-1/#comment-9401 Mon, 30 Nov 2009 22:01:50 +0000 http://blogs.reuters.com/felix-salmon/2009/11/30/mutual-fund-charts-of-the-day/#comment-9401 Felix,I don’t agree with your characterization of their paper as “research sponsored by an index-fund company”. That description makes it seem like the research was influenced by some for-profit company, rather than the product of two top-tier research institutions. There’s no evidence that I can see that DFA (the company I’m assuming you’re thinking of) supported or solicited this work in any way.

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