Why Most Equity Mutual Funds Underperform and How to Identify Those that Outperform
The Efficient Fund Hypothesis
@LewisBraham, I totally agree that there are a very limited number of active managers that are worth investing in, including:
PRWCX, VWIAX, VWELX, POAGX and other Primecap funds if open, MINIX, FMIJX, ARTGX, BCOIX, BPLSX, MSFAX, SIGIX, PIMIX, MTOIX, PRGTX, PRHSX, QLEIX, WHAIX, GLIFX, VSTCX, MACSX and MAPIX. There may be a few others, but not many.
Kevin

"You may be thinking that, if passive is the way to go, you might as well make things even simpler. Why not just put your retirement money in the bank and forget it? While you can certainly do that, the results may be disastrous. If you want more than just Social Security for your retirement, you need your money to grow.
Consider this. In 1913, nine cents bought a quart of milk. In 1963, the same nine cents bought a small glass of milk. In 2015, nine cents bought seven tablespoons of milk. Clearly, putting money under the mattress doesn't work for the long term. The culprit of the declining purchasing power of that nine cents is inflation. The moral of this story is to make sure your money grows at least as fast as inflation.
That requires investing it. For example, it would require $13 today to equal the purchasing power that $1 provided in 1926. Had you put one dollar in the bank in 1926, you would have $21 today. Having invested the dollar in long-term bonds would give you $132. However, invested in the S&P 500 index (stocks), you would have $5,386."

I love this assertion that the past stock market's performance is prelude to the future market's performance. Let's assume that indexers are right and that stock performance truly is a "random walk," which active managers can't predict and therefore can't beat. Why accept the other notion indexers believe in then that in the "long run stocks always go up" if it is truly random? The 104 years of market history this author cites is less than a heartbeat in the history of the planet. Just because markets have gone up in the past is no guarantee they will go up in the future. Rising markets are not a law of nature like gravity in physics. There is no guarantee even that stock markets will continue to exist. There is a historical precedence for markets disappearing altogether as happened to Russia in the 1910s during the Russian revolution: https://the-international-investor.com/2011/st-petersburg-stock-exchange-1865-1917-diversification-pays-emerging-markets
Can an active manager predict when the next bubble will burst or some major geopolitical event is about to occur with any certainty? No, but they can at least react defensively to it when a blind mechanical index can't. What indexing's triumph proves is not that markets are efficient, always rising and therefore unbeatable. It proves that costs matter. Costs are the one thing in funds you can predict will have an impact with a fairly accurate degree of mathematical certainty. Not just expense ratios, but trading costs and market impact costs. But a low cost, low turnover actively managed fund with a manageable level of assets can be a better investment than a mechanical index fund.

giggle. Rather than TD Ameritrade, I've been eyeballing TD, the bank. Well, ALL of the six major Canadian banks. Highly regulated. Seems a safer bet than US banks, coming up. I just KNOW the coming deregulation means trouble for ordinary people. And those six Canadian majors hold 90% of deposits in that country. Dividends are reliable as the sun and the moon. But I'm sorry--- this is a mutual fund board, just like "it's a song about Alice," remember? ;)

From Barrons "Investors Bear the Brunt of Merging Brokers"
"Consider the news this October that Scottrade will be acquired by TD Ameritrade Holding (ticker: AMTD). The deal set off a flurry of posts at Websites such as MutualFundObserver.com from worried investors about what this could mean for their fund portfolios. As one angst-ridden poster with the handle VintageFreak put it, “NO NO NO!!! Not TD Ameritrade.”
http://www.barrons.com/articles/investors-bear-the-brunt-of-merging-brokers-1484379375

@davidrmoran, Thanks for this fantastic article:
"Es-cape-ing from Overvalued Sectors: Sector
Selection Based on the Cyclically Adjusted
Price-Earnings (CAPE) Ratio"
Kevin

Hi guys!
You're the best, Skeeter! It's your thread and everybody knows it but you. Keep up the good work, big guy!
Not much to say.....doing a lot of watching, but will say this: seems everybody is looking for a pullback. But....what if we don't get one? ..... really?......then, what will you do? Add more money or wait? I watched wealth track this morning......it's part 2. They seem to think things are getting better in the world. What is a good Japan fund? I haven't been over there in years. Might put a little in there. I see Josh Peters has a fund he's managing now: OARDX. Will keep an eye on it for a while. Also, at work they came out with a buyout package. Yep! They're going to pay us to leave. I feel like a politician being bribed......I like it!!! Also, where's Ted? The board seems slow without him around. Also, give me your best fund.....one you will die before selling. I want to make a list before going into an IRA and paying $2500.00 to open a fund. Now, with 401k, it's only $500.00, so I might add some before I retire. Why? Because I'm a lot like Bee. Also, is a bank loan fund or short term bond fund as good as a money market account for short term money? If so, what funds? Also, if I get lump sum (via buyout) and put into IRA, will I have to pay taxes? I assume "yes," but I had to ask. Anybody else been here before? Funny......at the meeting, about 100 people there....I might've known half of them. So many friends are gone. Didn't realize that. They leave over time and you forget. Got to stop before I cry in my beer.
God bless
the Pudd

Scottrade offers both CENTX (world allocation) and CINTX (foreign LB) for $100 minimums in taxable and retirement accounts + TF as Kevin described.
Kevin

aah...i trusted M* fund page which still does not list Scottrade.

While I find M*'s "purchase" pages (lists of brokerage availability) some of the least reliable (usually errors of omission), in this case M* was spot on.
The CENTX purchase page and the CINTX purchase page each shows the fund available at "Scottrade TF" as Kevin described.
Regarding CETAX, the M* purchase page shows that you can already get it at TDAmeritrade NTF. TDAmeritrade confirms this; there the standard $5K min is required.

EFEIX shows a concentrated portfolio of just 47 stocks, and 7 "other." I compared it to TRAMX: 71 stocks, 2 bonds and 1 "other." EFEIX shows a better 1 and 3-year record, but TRAMX has a longer record, showing 5 yr. perf. at 7.23%. It seems to me that it's not worth the headache of all of the deep research you'd have to do, in order to justify owning a Frontier fund. Expense Ratios are high. If you want to buy it as a short-term trade rather than a long-term investment, it might make you happy. I made money with TRAMX years ago, but it was dumb luck.

DSEUX: I guess I'm not sure how it would work compared to domestic DSENX. DSENX buys undervalued sectors from the S&P 500. Pretty clear and straight forward. CAPE picks from a somewhat stable group of U.S. stocks. Companies in a sector somewhat move in tandem. What index or group of countries will this fund use when buying? If the consumer sector is where value lies, is it the same value in the UK as it is in Greece? There are just so many other variables when buying global, country and regional variables that can drive sectors differently in different countries. That is pretty much why managed international or EM funds typically do better than index.
It may be clear to others, but to me it is not straight forward how International CAPE will work and that it will have category beating returns like domestic CAPE. And because it is basically a semi-quant fund, there is no reason to get in early IM<HO. The "manager" has no more flexibility with a small asset base than a large one. But, to each his own.

@kevindow,
Thanks much. I chose (long ago) SGOIX over it, but agree it has been on a real tear.
I recently ditched OAKIX for Herro's idiot comments on global warming, and, since SGOIX is closed even to current investors, went w/ FOSFX. Shoulda switched to FMI instead.
I do not feel a need for a track record to develop w/ DSEUX, but for the last half-decade I have in any case kept at the front of my mind John Waggoner's pointing out that today no one really needs any foreign funds.
http://usatoday30.usatoday.com/money/perfi/funds/story/2012-07-04/second-quarter-mutual-funds-international/56008492/1
I just asked him if he still held this view and he said Pretty much.

PTIAX 35% Muni's as of:
FACT SHEET | DECEMBER 31, 2016
Non-Agency RMBS 43.68%
Tax-ExemptMunicipal 24.99%
Taxable Municipal 11.24%
CMBS 10.09%
CLOs 4.28%
Cash 2.14%
U.S.Treasuries 1.88%
Corporates 1.70%
http://ptiafunds.com/documents/ptiax_factsheet.pdf
No current commentary available as of 1/13/2017
High Yield Corps
Artisan High Income Fund 12/31/2017 Fact Sheet ARTFX
High yield bond yields and spreads compressed approximately 40bps in December. Since the mid-February peak in spreads, high yield bond yields are nearly 4 percentage points lower and spreads are roughly 450bps tighter. There was no bigger driver this year for credit markets than improving fundamentals in the commodity sectors. In December, the energy sector received an additional boost from OPEC’s agreement to curtail production.
Non-investment grade credit is clearly richer than it was coming into 2016 given the robust returns and degree of spread tightening that occurred. However, we believe the risk/reward opportunity in the asset class is still superior to most other areas of fixed income where yields remain quite low and possess greater interest rate risk. In that type of environment, we believe the idiosyncratic and focused nature of our portfolio is well positioned.
Corporate Bonds 74.9
Bank Loans 20.0
Equities 0.6
Cash and Equivalents 4.5
https://www.artisanpartners.com/content/dam/documents/monthly-commentary/vr/2016/dec/ARTFX-APDFX-MCommentary-1216-vR.pdf

It's an awfully admirable decision. They've been struggling for years to get attention. They returned 54% last year, despite a contracting pool of opportunities, and got serious attention. Having concluded that there simply aren't many opportunities and reluctant to hold cash, they're closing the door to their most popular channel. It seems very principled to me.
David

The country allocation of GVAL is bit too risky for my taste:
Russia 11.2%
Austria 10.9%
Brazil 10.2%
Portugal 9.7%
Spain 8.9%
Hungary 7.9%
Greece 7.8%
Poland 7.7%
Czech Republic 7.1%
Norway 6.5%
Hong Kong 6.2%
Italy 5.8%
I will stay with SFGIX for the emerging market. Also I established a position with DSEEX last fall - so far it has done well.

@BenWP,
FMIJX now offers an institutional class, FMIYX at lower expense ratio at 0.84% and a minimum $2,500 (not $1M with most institutional shares). At Fidelity, it requires $50 to purchase this transaction fee fund. You can buy more later via automatic investment and $5 per transaction. This was made available late last year and I have made the switch.

https://www.sec.gov/Archives/edgar/data/1318342/000139834417000539/fp0023990_497.htm
497 1 fp0023990_497.htm
Towle Deep Value Fund
(Ticker Symbol: TDVFX)
A series of Investment Managers Series Trust (the “Trust)
Supplement dated January 13, 2017 to the
Prospectus, Statement of Additional Information and Summary Prospectus, dated February 1, 2016.
IMPORTANT NOTICE ON PURCHASE OF FUND SHARES
Effective as of the close of business on January 27, 2017 (the “Closing Date”), the Towle Deep Value Fund (the “Fund”) will be publicly offered on a limited basis.
After the Closing Date, only certain investors will be eligible to purchase shares of the Fund, as described below (the “closure policy”). In addition, both before and after the Closing Date, the Fund may from time to time, in its sole discretion based on the Fund’s net asset levels and other factors, limit the types of investors permitted to open new accounts, limit new purchases into the Fund or otherwise modify the closure policy at any time on a case-by-case basis.
The following groups will be permitted to continue to purchase Fund shares after the Closing Date:
1. Shareholders of record of the Fund as of the Closing Date may continue to purchase additional shares in their existing Fund accounts either directly from the Fund or through a financial intermediary and may continue to reinvest dividends or capital gains distributions from shares owned in the Fund.
2. Existing registered investment advisor (RIA) and bank trust firms that have an investment allocation to the Fund in a fee-based, wrap or advisory account may continue to add new clients or purchase shares.
3. New shareholders may open Fund accounts and purchase shares directly from the Fund (i.e. not through a financial intermediary).
4. Certain financial intermediaries may continue to open new underlying customer accounts provided the platform on which they offer access to the Fund has an existing funded position.
5. Group employer benefit plans, including 401(k), 403(b), 457 plans, and health savings account programs (and their successor, related and affiliated plans), which make the Fund available to participants on or before the Closing Date, may continue to open accounts for new participants in the Fund and purchase additional shares in existing participant accounts. New group employer benefit plans, including 401(k), 403(b), and 457 plans, and health savings account programs (and their successor, related and affiliated plans), may also establish new accounts with the Fund, provided the new plans have approved and selected the Fund as an investment option by the Closing Date and the plan has also been accepted for investment by the Fund by the Closing Date.
6. Members of the Fund’s Board of Trustees, persons affiliated with the Advisor and their immediate families will be able to purchase shares of the Fund and establish new accounts.
In general, the Fund will rely on a financial intermediary to prevent a new account from being opened within an omnibus account established at that financial intermediary if the account would not otherwise satisfy the conditions outlined above. The Fund’s ability to monitor new accounts that are opened through omnibus accounts or other nominee accounts is limited and the ability to limit a new account to those that meet the above criteria with respect to financial intermediaries may vary depending upon the capabilities of those financial intermediaries. Investors may be asked to verify that they meet one of the exceptions above prior to opening a new account in the Fund. The Fund may permit you to open a new account if the Fund reasonably believes that you are eligible. The Fund also may decline to permit you to open a new account if the Fund believes that doing so would be in the best interests of the Fund and its shareholders, even if you would be eligible to open a new account under these exceptions. If all shares of the Fund in an existing account are redeemed, the shareholder’s account will be closed. Such former shareholders will not be able to buy additional shares of the Fund or reopen their account.
Please file this Supplement with your records.

Closed out JOHAX after another disappointing year. Adding to FMIJX in foreign large cap allocation. BTW, M* still has OAKIX as gold, 5 star but FMIJX has truly clocked it for three years.

From the talk by Deshpande a month ago:
"Finally, and most importantly the employees of Centerstone have invested eight figures
in total into the Funds. There can be, in my mind, no other greater alignment of interest
than investing alongside one’s client base."
Eight figures means more than $10M. The total AUM of the two funds is approximately $60M. In other words, unless I am mistaken, he says that more than 15% of the AUM of the two funds is due to the investment of the employees of Centerstone.