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FYI: (Attention John Bogle, here are 10 needles in your haystack !)
While it's true that most funds won't beat market indexes over long stretches after accounting for fees, here's a closer look at a handful of Morningstar Medalists that did. Regards, Ted http://news.morningstar.com/articlenet/article.aspx?id=804177
Is there a way to find out when M* made these funds "medalists"? I thought in their fund table they would have said how long the funds have been medalists.
Asking because I can look at the top funds for last 15 years year after year, make them ANALists, and then say I won!
Also, who will remember to wait 15 more years to see how these funds fared? No one. Unless of course they fare well, in which case M* surely will. But, wait. In another 15 years there would be more medalists. Nice gig, eh?
The only question that matters is will they beat the market over the next 15? How do you answer that? You have to ask are the conditions the same or at least similar to the ones that allowed the funds to beat the market the first time? Some of those condition questions can be answered and some can't. For instance, is the manager the same and is that manager as able bodied as he/she once was or has time dulled their edge somehow? Does the fund still invest in the same kinds of stocks as it once did or has asset boat caused style drift? Was it a certain style or strategy that was once in favor when this manager outperformed that is out of favor now and may never be in favor again? Was the outperformance just due to a few years of strong performance or to a consistent edge because if it was just a handful of banner years, that ourperformance may not come again? Is there a suitable succession plan in place for when this manager retires? Those are the sorts of questions one must ask before choosing such a fund instead of an index fund.
Lewis- With respect to your observations, that's pretty much why we've stayed with American Funds (for a major part of our fund exposure) for the best part of forty years now. Their funds are managed by committee, which tends to have an averaging effect, and allows for introduction of new viewpoints as the world churns. Usually no significant outperformance, but the slow and steady turtle works well too. (We haven't paid loads for "A" shares for almost 40 years.)
Morningstar introduced medal (and neutral and negative) ratings in 2011. So asking what medal, if any, a fund had 15 years ago is meaningless. The predecessor to medals was analyst pick or pan.
Here's the search that will get you these books. Just change the year (2007) in the URL to the year (between 2007 and 2012) that you're interested in. Then look at the contents of the "book" for Mutual Fund Analyst Picks to get you to the right page. https://www.google.com/search?q=Morningstar+analyst+picks+2007+site:nxtbook.com
Nice list. Great funds for long-term patient investors. But not for the squeamish for whom even a 10% pullback arouses fear or loathing.
Before you send money, be aware that $100 invested in DODGX at the beginning of 2008 was worth $56.69 at year's end. During that period it seemed everybody and his brother were bailing from D&C's funds and writing them off as permanent failures. Even if you bailed mid-way through the year, you'd likely have experienced a 20-25% near-term loss.
Not to knock D&C. I like them. Currently, at the high market valuations most of my $$ there resides in their two income funds. If stocks decide to go on sale again in my lifetime, some of that money will be shifted back into their fine equity funds. Agree with OJ's take on team management. Not sure if D&C employs that approach to the same extent American does - but it's one reason I like their funds.
@hank. If you can tell how long it was before $56.69 became $100 again? Might be instructive.
Perhaps then we can ask the question, if one sold DODGX when value fell to $90, and then bought it back after it crossed $100 again, ...
I think you get my drift. Funds don't keep falling from $100 to $90, up again to $100, back down to $90, again and again and again. The risk of "not being invested" is way overblown by the financial industry because it risks their revenue stream from our assets.
Fool me once, shame on you (2000-2002). Fool me twice (2007-2009) shame on Me. Fool me thrice (? - ?), shame on Who?
My ANALysis told me I should be 66% invested few weeks back. I kept selling my 401k assets down, AS LONG AS the funds I was invested had their NAVs decreasing. I made it down to 80% invested, never made it down to 66%. Those funds I didn't sell actually helped my portfolio performance as should be expected. Now my ANALysis tells me to be 100% invested, I'm creeping back in AS LONG AS the funds I'm invested in have their NAVs rising.
This is the definition of common sense. My name is VF and I approve this message.
December 31, 2008 - $56.69 (loss of 43.31%) December 31, 2009 - $74.41 (gain of 31.27%) December 31, 2010 - $84.44 (gain of 13.48%) December 31, 2011 - $81.00 (loss of 4.08%) December 31, 2012 - $98.83 (gain of 22.01%)
December 31, 2013 - $138.34 (gain of 40.55%)
You'd still be slightly behind 5 years after investing the initial amount. This assumes no custodial fees were paid from your invested amount over those years. Had you paid such fees out of invested money, you'd be further behind. Waiting one additional year would have paid-off. The fund jumped 40.55% in 2013.
"Perhaps then we can ask the question, if one sold DODGX when value fell to $90, and then bought it back after it crossed $100 again, ... "
That's a surefire way to lose money. You're selling on dips, and buying back when the price is higher than when you sold. For the money you got by selling your shares at $90, you get fewer shares back when you repurchase at $100.
I can make this concrete. I'm glad you mentioned 2000-2002. (All data from Yahoo finance.)
The first time in that time frame that the fund price dipped to $90 or below was 2/25/2000, at $89.44. (It had last been over $100 on 1/19/2000.) The lowest it got after that before going back over $100 was $89.36 on 3/7/2000. It reached $100 on 5/12/2000 ($100.09). Selling at virtually the bottom and buying back at $100 would have cost about 11%. Not to mention the missed dividend. (DODGX pays quarterly dividends, or at least it does now.)
The next time it dipped to $90 or below was 9/20/2001, at $87.95. The lowest it got after that was the next day, at $86.51. It went back over $100 on 11/26/2001, at $100.34. Selling low ($86.51) and buying high ($100.34) would have cost around 14%, again plus quarterly dividends forgone.
The final time it dipped to $90 or below might make you feel a little better. It dropped to $89.22 on 7/16/2002. It got as low as $75.03 on 10/9/2002, before passing $100 again on 6/12/2003 ($100.15). By being out of the market, you would have avoided some discomfort at watching your shares drop another 16%. Ultimately though, you'd still have paid $100.15 to buy back shares that you sold at $89.22.
A more effective strategy is to use trailing stops, which may be what you had in mind. I think you're trying to clip off the worst of the loss (by selling when it seems the fund is on its way down), and conversely, to pick up most of the gain (by selling when it looks like the fund is on its way to recovering). Trailing stops help you do that.
You want to reenter once the fund starts moving up, say from that low of $75.03 to a price "just" 10% higher, rather than wait for it to blow past the price you sold it at only to repurchase at a higher price.
An issue with this strategy is that corrections (10% moves) are more common than bear markets (20% moves). So if you sell when the fund drops 10%, you'll likely be selling into a correction, not a bear. In those cases, the fund won't drop 20%. Let's say the fund drops 15%. When it then gains 10% and you repurchase, its price will still be higher than the price you sold it at.
With 10% trailing stops, the only time you come out ahead (and it could be far ahead) would be in bear markets.
Peace of mind comes at a price. I prefer the strategy that BobC and others have suggested - keeping enough in cash and short term bonds to wait out market gyrations.
The IRS also tries to curtail such trading (wash sale rules). As with the IRS rules, fund short term trading rules can be easily circumvented by substituting one fund for another. While there are a few funds that are sufficiently unusual to make substitutions difficult, I wouldn't say DODGX falls into that group.
Err...I wasn't trying to be lazy and put you to work. Please accept my apologies. Since funds make distributions and they are reflected in the NAV, they artificially depress the NAV. So likely the "portfolio value" of the original $100, might have become $100 again a little earlier than what one can see in the chart. I was trying to ask if there was an easy way to find out.
@msf. I'm taking about risk adjusted return. If you waited till fund dropped 40% to sell and THEN again waited until it crossed $100, then that would totally be silly.
The point is to not "buy and hope" and have some mental stop loss. When you sell at 10% loss, you keep assets in risk free treasuries. They are going to accumulate some interest. You can decide to go back in sooner if you like, e.g. maybe on some moving average crossover.
All of our "investment advice" is predicated on "the stock market always goes up in the long term". Unless I'm mistaken, Japanese market has still not captured its all time high.
I trust I have made my point. To each his own.
Regarding "trailing stops". I think I do something similar. My ANALysis tells me how much % I should be invested and I gradually sell down or buy up to that allocation in increments. Additionally I don't fight the tape. Keeps me sane, able to sleep, AND most importantly invested to some degree at all times. I only do this in my retirement accounts where I don't have to worry about taxes.
Also, don't some mfunds try and curtail such trading? Maybe the intervals you cite are long enough not to trigger a response.
In my retirement accounts, if you sell any shares of a fund, you cannot buy back again until 15/30 days. TRP also has such restrictions. So what? You can buy other funds.
Sell Target Date 2060, Buy Target Date 2050. Sell S&P index, but midcap index.
Hi @VintageFreak You noted: "Err...I wasn't trying to be lazy and put you to work. Please accept my apologies. Since funds make distributions and they are reflected in the NAV, they artificially depress the NAV. So likely the "portfolio value" of the original $100, might have become $100 again a little earlier than what one can see in the chart. I was trying to ask if there was an easy way to find out." >>>No, no. I became curious with your question. You're not lazy. The time span for the fund in question was longer than I would have "guessed". The graphic/numbers chart that I posted does include all distributions. Stockcharts does adjust the NAV for such distributions to perform the calculations for the % returns indicated. This was my easy way of viewing as a percentage. The last day of December, 2007 included all of 2008 up until Jan. 13, 2013 to indicate a near zero percentage for a reference for the December start date and the fund did not recover to that same point until Jan. 2013. 'Course a purchase on March 6, 2009 is a different score, eh? Take care, Catch
@catch22 I always wondered if Stockcharts adjusted their NAV for distributions. Perhaps they do so after a time lag? Maybe a month later?
Every January, when I see a fund's chart, invariably I see a big "dip" in december. It's actually good to know they do adjust it at some point. I always worry my ANALysis would be off and keep me out of market longer because price would be artificially depressed.
Comments
Asking because I can look at the top funds for last 15 years year after year, make them ANALists, and then say I won!
Also, who will remember to wait 15 more years to see how these funds fared? No one. Unless of course they fare well, in which case M* surely will. But, wait. In another 15 years there would be more medalists. Nice gig, eh?
Those are the sorts of questions one must ask before choosing such a fund instead of an index fund.
I haven't found an analyst pick list going back quite that far, but here's one from a decade ago (2007). The site appears to have more recent ones as well.
http://www.nxtbook.com/nxtbooks/morningstar/advisor_2007fall/index.php?startid=82
Here's the search that will get you these books. Just change the year (2007) in the URL to the year (between 2007 and 2012) that you're interested in. Then look at the contents of the "book" for Mutual Fund Analyst Picks to get you to the right page.
https://www.google.com/search?q=Morningstar+analyst+picks+2007+site:nxtbook.com
Before you send money, be aware that $100 invested in DODGX at the beginning of 2008 was worth $56.69 at year's end. During that period it seemed everybody and his brother were bailing from D&C's funds and writing them off as permanent failures. Even if you bailed mid-way through the year, you'd likely have experienced a 20-25% near-term loss.
Not to knock D&C. I like them. Currently, at the high market valuations most of my $$ there resides in their two income funds. If stocks decide to go on sale again in my lifetime, some of that money will be shifted back into their fine equity funds. Agree with OJ's take on team management. Not sure if D&C employs that approach to the same extent American does - but it's one reason I like their funds.
Perhaps then we can ask the question, if one sold DODGX when value fell to $90, and then bought it back after it crossed $100 again, ...
I think you get my drift. Funds don't keep falling from $100 to $90, up again to $100, back down to $90, again and again and again. The risk of "not being invested" is way overblown by the financial industry because it risks their revenue stream from our assets.
Fool me once, shame on you (2000-2002). Fool me twice (2007-2009) shame on Me. Fool me thrice (? - ?), shame on Who?
My ANALysis told me I should be 66% invested few weeks back. I kept selling my 401k assets down, AS LONG AS the funds I was invested had their NAVs decreasing. I made it down to 80% invested, never made it down to 66%. Those funds I didn't sell actually helped my portfolio performance as should be expected. Now my ANALysis tells me to be 100% invested, I'm creeping back in AS LONG AS the funds I'm invested in have their NAVs rising.
This is the definition of common sense. My name is VF and I approve this message.
DODGX break even point, per this chart, includes all distributions. Dec. 28, 2007-Jan. 2013.
http://stockcharts.com/freecharts/perf.php?DODGX&l=2260&r=3531&O=011000
DODGX - Value of $100 on January 1, 2008
December 31, 2008 - $56.69 (loss of 43.31%)
December 31, 2009 - $74.41 (gain of 31.27%)
December 31, 2010 - $84.44 (gain of 13.48%)
December 31, 2011 - $81.00 (loss of 4.08%)
December 31, 2012 - $98.83 (gain of 22.01%)
December 31, 2013 - $138.34 (gain of 40.55%)
You'd still be slightly behind 5 years after investing the initial amount. This assumes no custodial fees were paid from your invested amount over those years. Had you paid such fees out of invested money, you'd be further behind. Waiting one additional year would have paid-off. The fund jumped 40.55% in 2013.
That's a surefire way to lose money. You're selling on dips, and buying back when the price is higher than when you sold. For the money you got by selling your shares at $90, you get fewer shares back when you repurchase at $100.
I can make this concrete. I'm glad you mentioned 2000-2002. (All data from Yahoo finance.)
The first time in that time frame that the fund price dipped to $90 or below was 2/25/2000, at $89.44. (It had last been over $100 on 1/19/2000.) The lowest it got after that before going back over $100 was $89.36 on 3/7/2000. It reached $100 on 5/12/2000 ($100.09). Selling at virtually the bottom and buying back at $100 would have cost about 11%. Not to mention the missed dividend. (DODGX pays quarterly dividends, or at least it does now.)
The next time it dipped to $90 or below was 9/20/2001, at $87.95. The lowest it got after that was the next day, at $86.51. It went back over $100 on 11/26/2001, at $100.34. Selling low ($86.51) and buying high ($100.34) would have cost around 14%, again plus quarterly dividends forgone.
The final time it dipped to $90 or below might make you feel a little better. It dropped to $89.22 on 7/16/2002. It got as low as $75.03 on 10/9/2002, before passing $100 again on 6/12/2003 ($100.15). By being out of the market, you would have avoided some discomfort at watching your shares drop another 16%. Ultimately though, you'd still have paid $100.15 to buy back shares that you sold at $89.22.
A more effective strategy is to use trailing stops, which may be what you had in mind. I think you're trying to clip off the worst of the loss (by selling when it seems the fund is on its way down), and conversely, to pick up most of the gain (by selling when it looks like the fund is on its way to recovering). Trailing stops help you do that.
You want to reenter once the fund starts moving up, say from that low of $75.03 to a price "just" 10% higher, rather than wait for it to blow past the price you sold it at only to repurchase at a higher price.
An issue with this strategy is that corrections (10% moves) are more common than bear markets (20% moves). So if you sell when the fund drops 10%, you'll likely be selling into a correction, not a bear. In those cases, the fund won't drop 20%. Let's say the fund drops 15%. When it then gains 10% and you repurchase, its price will still be higher than the price you sold it at.
With 10% trailing stops, the only time you come out ahead (and it could be far ahead) would be in bear markets.
Peace of mind comes at a price. I prefer the strategy that BobC and others have suggested - keeping enough in cash and short term bonds to wait out market gyrations.
Since funds make distributions and they are reflected in the NAV, they artificially depress the NAV. So likely the "portfolio value" of the original $100, might have become $100 again a little earlier than what one can see in the chart. I was trying to ask if there was an easy way to find out.
Thanks again for taking the trouble
The point is to not "buy and hope" and have some mental stop loss. When you sell at 10% loss, you keep assets in risk free treasuries. They are going to accumulate some interest. You can decide to go back in sooner if you like, e.g. maybe on some moving average crossover.
All of our "investment advice" is predicated on "the stock market always goes up in the long term". Unless I'm mistaken, Japanese market has still not captured its all time high.
I trust I have made my point. To each his own.
Regarding "trailing stops". I think I do something similar. My ANALysis tells me how much % I should be invested and I gradually sell down or buy up to that allocation in increments. Additionally I don't fight the tape. Keeps me sane, able to sleep, AND most importantly invested to some degree at all times. I only do this in my retirement accounts where I don't have to worry about taxes.
Sell Target Date 2060, Buy Target Date 2050.
Sell S&P index, but midcap index.
Hardly an issue for me.
You noted: "Err...I wasn't trying to be lazy and put you to work. Please accept my apologies.
Since funds make distributions and they are reflected in the NAV, they artificially depress the NAV. So likely the "portfolio value" of the original $100, might have become $100 again a little earlier than what one can see in the chart. I was trying to ask if there was an easy way to find out."
>>>No, no. I became curious with your question. You're not lazy. The time span for the fund in question was longer than I would have "guessed".
The graphic/numbers chart that I posted does include all distributions. Stockcharts does adjust the NAV for such distributions to perform the calculations for the % returns indicated. This was my easy way of viewing as a percentage. The last day of December, 2007 included all of 2008 up until Jan. 13, 2013 to indicate a near zero percentage for a reference for the December start date and the fund did not recover to that same point until Jan. 2013. 'Course a purchase on March 6, 2009 is a different score, eh?
Take care,
Catch
Every January, when I see a fund's chart, invariably I see a big "dip" in december. It's actually good to know they do adjust it at some point. I always worry my ANALysis would be off and keep me out of market longer because price would be artificially depressed.
http://personal.fidelity.com/products/trading/Trading_Platforms_Tools/excessive_trading_policies.shtml