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Why You Shouldn't Put All Your Money In Index Funds
FYI: Stock index funds are performing superbly as the bull charges ahead. But don’t look for them to protect you when the market stumbles. Regards, Ted http://www.kiplinger.com/printstory.php?pid=12697
"And FPA Crescent is hardly the only conservative stock fund that promises to soften the pain of the next bear market. Matthews Asian Growth & Income (MACSX), which lost 39.4% in the 2007-09 bear market, and Vanguard Dividend Growth (VDIGX), which lost 42.3%, are two more fine examples."
Can I get this promise in writing? What is my recourse if these funds don't deliver?
To avoid index funds because of a bear market one would have to find a manger good at market timing .Do they exist? Another way would be to rebalance into more bonds and cash/.A third way would be to buy a more conservative fund after selling an aggressive one.It is my understanding that index funds did ok in 2008. Not by doing well but by outperforming more than half the active funds.
To avoid index funds because of a bear market one would have to find a manger good at market timing .Do they exist? It is my understanding that index funds did ok in 2008. Not by doing well but by outperforming more than half the active funds.
@jerry, looks like you are right. The Vanguard Total Stock Market index fund did outperform more than half the active large blend funds in 2008. As well as every year from 2004-Year to Date.
Gah, have we not been over this many times? Think about it unaggregated. Chart GABEX, AMANX, PRBLX, YACKX, and FLPSX against SP500 from August 08 to August 2012. All different outfits and approaches. Pay attention to dip depth and then time to recovery. SP500 is the laggard --- by far.
You can always plead selection bias, 'Well, someone has to outperform'. But the point is that all of the managers of those prudent funds were bruited bigtime well before 2008, well before, some of them for the 20 or more years preceding. I did not get into these funds or recommend them to my wife and parents and children and friends in 2009 or whenever; I did it in 2003, or 1997, or some of them 1990. Based on reading and research and backtesting such as it was possible to do back then. I have no gift for this kind of thing, but these managers certainly do. And I stuck with them except for Gabelli, when I switched all of those holdings over to Ahlsten, based solely on dip protection.
Most of this holds for Danoff/FCNTX too.
So either stick with indexing and all it entails, or do your due diligence and look for active managers who demonstrate smidgens of prudence and foresight and protective behaviors. I (overly diversified like so many here) used to be in D&C, Fairholme, and Weitz also, but over time came to see that they did not show the judgment I valued.
VTI and VBMFX, just for the heck of it, U.S. centric, buy and hold for the past 15 years = 7.12% annualized.
At the below chart, right click on the "200 day" icon in the slider bar and select "all" for the period back to July, 1999. Insert tickers (separated by a comma) of your choice, for your own checks.
Comments
Can I get this promise in writing? What is my recourse if these funds don't deliver?
You can always plead selection bias, 'Well, someone has to outperform'. But the point is that all of the managers of those prudent funds were bruited bigtime well before 2008, well before, some of them for the 20 or more years preceding. I did not get into these funds or recommend them to my wife and parents and children and friends in 2009 or whenever; I did it in 2003, or 1997, or some of them 1990. Based on reading and research and backtesting such as it was possible to do back then. I have no gift for this kind of thing, but these managers certainly do. And I stuck with them except for Gabelli, when I switched all of those holdings over to Ahlsten, based solely on dip protection.
Most of this holds for Danoff/FCNTX too.
So either stick with indexing and all it entails, or do your due diligence and look for active managers who demonstrate smidgens of prudence and foresight and protective behaviors. I (overly diversified like so many here) used to be in D&C, Fairholme, and Weitz also, but over time came to see that they did not show the judgment I valued.
At the below chart, right click on the "200 day" icon in the slider bar and select "all" for the period back to July, 1999.
Insert tickers (separated by a comma) of your choice, for your own checks.
http://stockcharts.com/freecharts/perf.php?Vti,vbmfx#
Just my own humble opinion, with charting for the fun of it.....; of which, saved our monetary bacon in July of 2008.
Have fun,
Catch