*** Mutual Funds ***

[Charm&Style]

Anyone ever invested in a mutual fund?

Any tips/advice ?

Im thinking of investing in one after i do a bit more research.

 

[Francisco d'Anconia]

The Kitchen Table Invertor

 

[Throttle]

your goals? what do you plan on using the money for and when?

check out the book "A Random Walk Down Wall Street"

my goal has always been lowest fee index funds, b/c evidence has shown over and over that any extra gains made by mutual funds are more than eaten up by mangement costs.

 

[bob2007]

your goals? what do you plan on using the money for and when?

check out the book "A Random Walk Down Wall Street"

my goal has always been lowest fee index funds, b/c evidence has shown over and over that any extra gains made by mutual funds are more than eaten up by mangement costs.

I disagree, I've been involved in stock market research for many years. Good managers will have better than average returns, they're out there, although not too many. Index funds are only good if the market keeps going up, which isn't necessarily true, recall the previous bubble. Imagine buying at the top. Recall a couple months ago when the market sold off huge!. I saw Goldman sachs stock drop almost 10%, not a pretty sight as a lot of stocks dropped like crazy that day.

I would advise you to look at morningstar.com look for funds that have a long history of above average returns run by the same manager. Depends on your risk tolerance of course. Learn mutual fund terms like front load, back load (fees before you buy or after you buy), they can be expensive. Look at MER, management expense ratios.

 

[Throttle]

i stand by everything i said above, and will add that past returns not only do not guarantee future results, but that the deck is actually stacked against you if you play that game -- selection bias: unsuccessful funds get shut down.

i can think of no reason to go into an actively managed mutual fund.

 

[bob2007]

i stand by everything i said above, and will add that past returns not only do not guarantee future results, but that the deck is actually stacked against you if you play that game -- selection bias: unsuccessful funds get shut down.

i can think of no reason to go into an actively managed mutual fund.

No reason? How bout the several market crashes. Index funds have selection bias too. Stocks get deslisted off indexes and exchanges. Just because the typical index benchmark grew 10% average does not mean it will continue to. How bout the fact that there's bias in relation to the success of the United States of America, what if it was Japan that the average was based on?

Ever heard of Peter Lynch? Very successful mutual fund manager in his day. Read about him and his strategies and you'll know how a lot of mutual fund managers may be posers, but the real experts are definetly out there.

The random walk theory is only a theory taught in school. You would be a big time amateur if you said this in the investment community. I majored in finance, and finance profs don't have a clue about the real market. It's a buy and hold strategy that worked before.

Regarding an index fund, what is the market benchmark and which index would you invest in? What actually represents a the true index benchmark? NASDAQ? Dow Jones Industrial Average? S and P 500 is an index but is similar to a managed fund since its selected by the good people of S and P. And that, "is" the typical benchmark people use.

How can the market be a random walk when everyone uses a benchmark that is similar to a selection of stocks by S and P corporation. Mutual Funds are actually being compared to an index (which is actually a fund). Sure a bunch of them can't beat it, doesn't mean that it's unbeatable because others do. S and P 500 index charges no expenses, and ahead of the game, as it selects stocks, before index based funds follow it, pushing prices higher.

Just some things to think about. I am against index funds and conventional wisdom of buy and hold strategies. No, I don't think many mutual fund Nobody said investing was easy. But I'm sure theres fund managers that can do it well and beat an index, at least they can cut losses and sell stock.

 

[Throttle]

well, buy and hold has worked for every relevant historical period in the US stock market. and i don't know of any major managed mutual funds (i am excluding hedge funds) that got hammered less in a crash than unmanaged index funds.

How bout the fact that there's bias in relation to the success of the United States of America, what if it was Japan that the average was based on?

then you would have to show me a mutual fund manager who made money as the Nikkei collapsed. or at least didn't lose their shirts as badly. I don't know of any.

Ever heard of Peter Lynch? Very successful mutual fund manager in his day. Read about him and his strategies and you'll know how a lot of mutual fund managers may be posers, but the real experts are definetly out there.

sure. but how do you find them? past returns do not guarantee future results, the average tenure of an active fund manager is pitifully short, and nobody will help me solve the selection bias problem by giving me info that would point out the true turkeys among fund managers (how? by simulating just how badly poorly performing funds would be doing if they were still around).

You would be a big time amateur if you said this in the investment community.

i'm fine with that. investment professionals can't make very much money off index funds (a few big firms have that locked up) and buy-and-hold strategies. they want to see lots of trading! fat commissions!

if being an amateur means keeping that money, i'll be happy to be shunned by investment "professionals"... the only bad money advice I've ever gotten was from folks who had a commission riding on giving me advice that was in their interest, not mine.

Regarding an index fund, what is the market benchmark and which index would you invest in?

would? am. on the equities side i am invested in the equivalent of the Wiltshire 5000 (i have no interest in advertising for my mutual fund company but will reply in private if pressed). sure there's a selection bias there, i will admit. and there is great volatility in stocks, which is why i asked the OP about his goals. 5 years would be a minimum time horizon for using money invested in any equities.

i put my very small amount of money where my mouth is--and the two are clearly out of proportion to one another

doesn't mean that it's unbeatable because others do.

i agree that some do beat it--but why would they share those gains with me? and how am I supposed to stay away from the 80% of funds that don't (after expenses)? that is, how do I find the next peter lynch -- and why wouldn't he leverage himself & his friends to the max possible to eat up all that "beta" himself? just give me reliable alpha... if the US stock market tanks in the long term, I'm screwed in so many ways that my equity porfolio is the least of my worries! and I don't think even peter lynch could save my arse from that fire.

Just some things to think about. I am against index funds and conventional wisdom of buy and hold strategies. No, I don't think many mutual fund Nobody said investing was easy. But I'm sure theres fund managers that can do it well and beat an index, at least they can cut losses and sell stock.

If they actually knew when to cut losses...but history shows they don't. Look, clearly you have your Kool-Aid and I have mine. The investment community pretty much drinks all the same Kool-Aid, and most of them are doing quite nicely for themselves, quite nicely indeed, including many of my college classmates. I strongly suspect they do so at the expense of their clients.....

IF hedge funds were actually hedging, then they'd be useful diversification and i'd be all over them. but there's too much liquidity chasing too few great strategies, and all the moolah I might get my hands on has long since been arbitraged away.

 

[CLOONEY]

i stand by everything i said above, and will add that past returns not only do not guarantee future results, but that the deck is actually stacked against you if you play that game -- selection bias: unsuccessful funds get shut down.

i can think of no reason to go into an actively managed mutual fund.

Thats why Warren Buffett could easily be the richest man on the planet, huh?

He PREACHES looking through historical data, as past returns, usually indicate future results. Its called good management, and a consumer monopoly. If funds know where to invest, they will gain these rewards. Lets look at Birkshire Hathaway (a fund of sorts) for example.

Bob, dont even bother argueing with Throttle, he obviously has no idea about investments.

Macquarie bank in Australia, relatively low fees for them to invest your money, GREAT returns! Why do you think its SO CRITICAL for you to invest your superannuation into a good super fund, low fees and good results, will lead to hundreds of thousands of dollars difference in the average persons superannuation upon their retirement, the beaty of compounding rates of return!

Oh and let me add, I invest my own money through value investing, but I have 20% of my portfolio invested with a fund, which has outperformed ANY of the major indices over the past 20 years, it has averaged well over 20% growth pa. Incredible!

 

[CLOONEY]

I am against conventional wisdom of buy and hold strategies.

I disagree on this part. Finding undervalued stocks with consumer monopolies are a KILLER money spinner! Watch BKL on the Australian index once a correction takes place.

On another note, any of you guys heard of Ken Murray or Blue Planet Investment Management? He operated three of the four best performing financial funds in the UK last year.

Someone was also saying how fund managers do not cut losses?

Ken has revealed he has offloaded equities and cut the gearing on the firm’s portfolios to zero in the belief a US economic recession is set to wipe more than 20 per cent from the value of global stock markets.

 

[Throttle]

Thats why Warren Buffett could easily be the richest man on the planet, huh?

warren buffett has done quite well by being an excellent manager with an eye to value, and has been able to attract lots of money that way. if you had the intuition to see that when b.h.'s shares were much cheaper, congratulations. thanks for bringing him up, though, b/c in 1996 he said:

"The best way to own common stocks is through an index fund."

Bob, dont even bother argueing with Throttle, he obviously has no idea about investments.

that's right, attack the poster, not his ideas! the o.p. wanted advice, i'm offering mine.

Oh and let me add, I invest my own money through value investing, but I have 20% of my portfolio invested with a fund, which has outperformed ANY of the major indices over the past 20 years, it has averaged well over 20% growth pa. Incredible!

congratulations. hopefully it will still be up when you need that money.

Ken has revealed he has offloaded equities and cut the gearing on the firm’s portfolios to zero in the belief a US economic recession is set to wipe more than 20 per cent from the value of global stock markets.

and if it doesn't materialize and meanwhile that money has been out of US equities while the markets hit new records...? i know of no evidence showing that there exist any professional money managers who can consistently time the markets.

all this proves is that money managers TRY to cut their losses. but let's wait until 1, 2 & 5 years out before we declare whether Ken made the right choice or not.

if you think you can find undervalued gems, go for it! but you can get plenty of compounding returns from low cost index funds or their related ETFs.

 

[Francisco d'Anconia]

i stand by everything i said above, and will add that past returns not only do not guarantee future results, but that the deck is actually stacked against you if you play that game -- selection bias: unsuccessful funds get shut down.

i can think of no reason to go into an actively managed mutual fund.

Besides, what aspects if any are gauranteed in the stock market?

 

[bob2007]

thanks for bringing him up, though, b/c in 1996 he said:

"The best way to own common stocks is through an index fund."

QUOTE]

Buffet's also said that he would have 50% annual returns if he managed small money like the average investors. Best way is to invest is in index funds? He doesn't fully invest in index funds. People always say things, doesn't necessarily make them true or that they follow it.

I think religion is good for people, but I'm not a believer.

Hedge funds don't actually hedge positions as a strategy often. It's just that they are can be leveraged, and have the ability to short, unlike mutual funds.

Personally, I don't invest in mutual funds, I like to pick my own stocks, typically growth stocks. I agree with Clooney that there's no point arguing, feels like just wasting time, especially since its investments everyone has their opinion. I actually interviewed the people of Canadian Pension Plan few weeks ago. I was very distraught with the fact that they were heavily indexed, that's why I was quite interested in this post.

I asked them the same question, what is the true index benchmark, and what if the market tanks. Their reply was it always comes back and they didn't have an answer for the true index (not that I would've gotten in an arguement). Funny thing, one interviewer said I seemed "money oriented" (greedy) looking at my resume as a trader. I'm thinking wtf, is she even in this to make money for Canadian Pensioners, who the **** in investments isn't greedy and successful? Didn't get the job after 2nd interviews, I'm pretty sure she was the one that screwed me over.

 

[Throttle]

hey, i don't have any problem advising someone that mutual funds are a sub-par investment vehicle, and that you should take the time to educate yourself on value investing and all the rest.

but i have a problem with the theory that actively managed mutual funds can do that for you, b/c all the evidence i'm aware of points in the opposite direction. the o.p. asked about mutual funds, not investing in general, so i've offered what i've got on that subject.

i'd still like to know how c&s's goals fit with ANY of the advice we've been doling out.....

the scariest answer to your Big Question about the prospect of the market tanking is the possibility that markets are much worse than a random walk as G. Malkiel describes it, but rather a truly random walk -- they're just as likely to go down as up!

 

[Wyldfire]

If you put $1 a day in mutual funds from the time you are 18 you will be able to retire a millionaire.

 

[WesCottII]

If you put $1 a day in mutual funds from the time you are 18 you will be able to retire a millionaire.

Shush please.

 

[CLOONEY]

the scariest answer to your Big Question about the prospect of the market tanking is the possibility that markets are much worse than a random walk as G. Malkiel describes it, but rather a truly random walk -- they're just as likely to go down as up!

True, the market is hard to predict. Though, Fiscal, and especially the RBA through the use of monetary policy predict changes in markets very effectively (at least here in Australia they have).

The same as the stockmarket, in times of economic prosperity, and assuming companies are priced fair, one would predict a rise in the stockmarket and vice-versa.

 

[Charm&Style]

thnx for the advice..

have any of you had success with mutual funds, for a beginner like me, from your past experience should i begin buying stocks and getting used to the process of being a share-holder or just keep studying and begin an investment in a mutual fund?

As far as books, i have bought 2, "Rich dad poor dad" and "The idiots guide to Wall Street".

Where did you guys begin at?

Any good website you guys recommend for online stocking.


thnx again.

 

[CLOONEY]

thnx for the advice..

have any of you had success with mutual funds, for a beginner like me, from your past experience should i begin buying stocks and getting used to the process of being a share-holder or just keep studying and begin an investment in a mutual fund?

As far as books, i have bought 2, "Rich dad poor dad" and "The idiots guide to Wall Street".

Where did you guys begin at?

Any good website you guys recommend for online stocking.


thnx again.

Keep studying for the moment. The market is at all-time highs, and we could get a correction sometime in the next year or so. Just study study study, and definately invest in your own stocks. You can either trade, which I did, and find far too risky and time consuming, or you can invest, which is about finding great undervalued companies. This is also a risk, though not a great risk. I would recommend, The Buffettology workbook without a doubt! By far the best read on value investing. Though, this will probably take months for a beginner to understand and be able to apply to your own stocks you would like to buy. So get started now!

Successful value investing can outperform nearly all mutual funds, especially considering you are not charged fees. Just a couple of a percent higher return on investments per annum can mean HUGE dollars in the long-run.

 

[I love Hyori Lee]

Vanguard.

Read the book, "The Lazy Person's Guide to Investing".

 

[Zonder]

An indexed fund the only way to go for a person who needs to ask this question. If an indexed fund is not good enough for you then you wouldn't be asking for advice. Also, you may want to stay away from "the idiot's guide" type of books when it comes to serious investing. I've never met a professional who didn't recommend indexed funds to inexperienced people. The time, effort and expertise that goes into selecting the rights stocks is simply out of reach even to most finance majors.