BADFISH II
11-28-2006, 04:55 PM
Vanguard is best in the business for the average investor, bar only one in my opinion and that's DFA. BUT for the average investors (most investors can't access DFA directly for several reasons) Vanguard kicks tail!
Check this one out - Morningstar created a portfolio with "the best of the best" and even managed it. It couldn't even beat just the static Vanguard indexes. CRAZY! The Wall Street Machine WANT'S you to believe they add value - they don't! Get a good advisor and build a portfolio of passive funds and you should do just fine over time!
Here's the latest scoop from Weston Wellington - he's the BEST!
November 27, 2006Are We Having Fun Yet?
Advocates of active management often concede that past performance of money managers is an unreliable guide to future results, but claim that careful assessment of qualitative factors such as organizational strength, investment philosophy, decision-making process, etc., can be useful in identifying those most likely to exhibit persistence in performance. An interesting test of this assertion has now accumulated five years of evidence and the results are not encouraging for fans of stock pickers or those who select them.
Morningstar FundInvestor, a monthly print publication seeking to deliver "research and recommendations for the serious investor," introduced two model mutual fund portfolios in November 2001, and a third portfolio was added the following May. In an article announcing the new models, Morningstar suggested that identifying superior funds was a straightforward exercise for capable analysts: "picking great funds," they observed, was "the fun part of the investment process."
For each portfolio, Morningstar selects seven to ten mutual funds diversified across the large/small cap and growth/value style map, and fund holdings are adjusted when deemed appropriate. Each month, Morningstar reports the performance of the portfolios and their components and explains their thinking regarding additions or deletions.
To provide an achievable investment alternative for comparison, Morningstar constructed blended benchmarks composed of three Vanguard index funds: Total Stock Market, Total International Stock Market, and Total Bond Market. Each benchmark replicates the model's target asset class exposure.
Turnover at the portfolio level has been low: six of the eight funds in the Wealth Maker Portfolio as of October 31, 2006, for example, were also in the portfolio two years earlier. Over this period, one fund was replaced (Fidelity Capital Appreciation, FDCAX) and two funds were added (Harbor International Growth Institutional, HAIGX; and T. Rowe Price New America Growth, PRWAX).
The model portfolios are designed to "let fund selection shine through" and have maintained a consistent asset allocation policy since inception, so results reflect the ability of Morningstar analysts to identify fund managers with superior stock selection skill. Two of the portfolios have five-year performance records for the period ending October 31, 2006, while the third has a record of four-and-a-half years. None of the portfolios have outperformed their benchmarks since inception, and two have underperformed over the most recent twelve-month period as well.
Morningstar analysts have access to detailed information on thousands of funds and are among the most knowledgeable and thoughtful researchers in the mutual fund industry. If they find outperforming a straightforward index fund strategy so challenging, what extra information do other investors (or their advisors) claim to have that Morningstar has overlooked?
Portfolio Inception Equity/Fixed Total Return
Aggressive Wealth Maker
Benchmark November 1, 2001 85%/15% 51.8%
56.4%
Wealth Maker
Benchmark November 1, 2001 65%/35% 41.8%
48.1%
Wealth Keeper
Benchmark May 1, 2002 35%/65% 32.8%
34.3%
Carlson, Greg. "A Big Year for Our Foreign Funds." Morningstar FundInvestor, November 2006.
Benz, Christine, and Russell Kinnel. "Introducing Model Portfolios." Morningstar FundInvestor, October 2001.
Check this one out - Morningstar created a portfolio with "the best of the best" and even managed it. It couldn't even beat just the static Vanguard indexes. CRAZY! The Wall Street Machine WANT'S you to believe they add value - they don't! Get a good advisor and build a portfolio of passive funds and you should do just fine over time!
Here's the latest scoop from Weston Wellington - he's the BEST!
November 27, 2006Are We Having Fun Yet?
Advocates of active management often concede that past performance of money managers is an unreliable guide to future results, but claim that careful assessment of qualitative factors such as organizational strength, investment philosophy, decision-making process, etc., can be useful in identifying those most likely to exhibit persistence in performance. An interesting test of this assertion has now accumulated five years of evidence and the results are not encouraging for fans of stock pickers or those who select them.
Morningstar FundInvestor, a monthly print publication seeking to deliver "research and recommendations for the serious investor," introduced two model mutual fund portfolios in November 2001, and a third portfolio was added the following May. In an article announcing the new models, Morningstar suggested that identifying superior funds was a straightforward exercise for capable analysts: "picking great funds," they observed, was "the fun part of the investment process."
For each portfolio, Morningstar selects seven to ten mutual funds diversified across the large/small cap and growth/value style map, and fund holdings are adjusted when deemed appropriate. Each month, Morningstar reports the performance of the portfolios and their components and explains their thinking regarding additions or deletions.
To provide an achievable investment alternative for comparison, Morningstar constructed blended benchmarks composed of three Vanguard index funds: Total Stock Market, Total International Stock Market, and Total Bond Market. Each benchmark replicates the model's target asset class exposure.
Turnover at the portfolio level has been low: six of the eight funds in the Wealth Maker Portfolio as of October 31, 2006, for example, were also in the portfolio two years earlier. Over this period, one fund was replaced (Fidelity Capital Appreciation, FDCAX) and two funds were added (Harbor International Growth Institutional, HAIGX; and T. Rowe Price New America Growth, PRWAX).
The model portfolios are designed to "let fund selection shine through" and have maintained a consistent asset allocation policy since inception, so results reflect the ability of Morningstar analysts to identify fund managers with superior stock selection skill. Two of the portfolios have five-year performance records for the period ending October 31, 2006, while the third has a record of four-and-a-half years. None of the portfolios have outperformed their benchmarks since inception, and two have underperformed over the most recent twelve-month period as well.
Morningstar analysts have access to detailed information on thousands of funds and are among the most knowledgeable and thoughtful researchers in the mutual fund industry. If they find outperforming a straightforward index fund strategy so challenging, what extra information do other investors (or their advisors) claim to have that Morningstar has overlooked?
Portfolio Inception Equity/Fixed Total Return
Aggressive Wealth Maker
Benchmark November 1, 2001 85%/15% 51.8%
56.4%
Wealth Maker
Benchmark November 1, 2001 65%/35% 41.8%
48.1%
Wealth Keeper
Benchmark May 1, 2002 35%/65% 32.8%
34.3%
Carlson, Greg. "A Big Year for Our Foreign Funds." Morningstar FundInvestor, November 2006.
Benz, Christine, and Russell Kinnel. "Introducing Model Portfolios." Morningstar FundInvestor, October 2001.