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Tony;

 

 

In terms of the funds you cited yes they are closed and that does show some sense of concience on the managers part. It also shows that they are large for a reason-probably because of success!!

 

Having said that you are correct that the funds you mentioned are closed but closures are never permanent

as managers do re open the funds from time to time and sometimes they are stiill available within retirement

plans and ira's I believe.

 

 

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Hey, Tony. I'd like to weigh in here a bit: the managers of actively managed funds leave at some point! All of their expertise and success and ... whoosh! Gone. I know because I struggled through numerous manager changes at funds that had been successful.

 

When a successful manager of an active fund leaves, the reason for owning the fund is no longer valid, so the search goes on for the next star ... until he/she leaves, when the process repeats itself yet again.

 

This is where I will give American Funds their due. They use a team approach, so that when one co-manager leaves (which is pretty rare. Those guys stay forever!), there is less adverse effect. Now, if they could just dump the sales load ...

 

As much as I like Fidelity, just look at the turnover among managers of active funds. It's a revolving door.

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In terms of the funds you cited yes they are closed and that does show some sense of concience on the managers part. It also shows that they are large for a reason-probably because of success!!

 

Looking at historical returns is not an indicator of future success in funds. So let's say for example a fund manager allocated a significant amount of technology companies to a fund(at a higher risk), say in the late 90ies, and the fund return was higher than other funds., Well the fund attracted the eye of those who measure success by past performance( and think that the manager is great or the fund is well managed, etc.. Well the hoard of people who bought into the fund at higher prices lost a significant amount of money when the fund returns dropped. In fact in cases like these some make money up front while many who invest later on loss signicant amount. This is true example, that not only happen in the 90ies, but at various times. It also happens, when the returns of fund are exagerated because the fund showed large success in different market segment such a the Fidelity low price fund which had been a low price value, and now a closet midcap index fund at a very high expense for what you get.

 

By the way you had also recommended the Harbor International fund. H Castegren the fund manager has been with the fund for many many years. How much longer will he be with the fund. Are you aware that the historical returns you might read about for this fund is biased, since about 2 or 3 years ago the expense ratio for the fund has been raised. The orginal fund share holders get the institutional expense ratio, much lower than new purchasers of the fund will pay. To make a point , I had owned this fund for over 10 years and enjoyed its success, and had been entitled to the instutional expense ratio, but last year I sold this fund since my asset allocation to international had significantly increased because of internation success. I did not sell any of my international index funds.

 

 

4. Active Management has a limited place for investors (even IRA admits to limited use of active management) who do their homework

 

Dan, I use active management where indexed equity funds are not available. I look for a broad based, low expense ratio fund, and wait for a index to come about in the category. I also use active management Vanguard bond funds where the expense ratios are similar to indexed bond funds.

 

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Ira

 

You are amazing. You know my funds better than I do. I still own Harbor International and I don't regret it.

I do worry that that great manager Castergren will depart. But I also own Acorn Fund who had an impressive manager in Ralph Wenger, He retired and the fund is still just as good as ever because he some

good assistants . Its has beaten its index . It hasn't changed its strategies or philosphies

 

Fidelity has a bigger problem than average with manager turnover . Fidelity is definetly a concern in that area.

 

I also own Vanguard Health Care which I doubt you will critize?

 

 

I just wish I had started indexing in my twenties. Had I only known !!! I wouldn't have to sit here defending

my investment decisions.

 

Hey at least I'm not in annuities!! Thanks for keeping me alert!! This is a great site.

 

Tony

 

 

 

 

 

 

In terms of the funds you cited yes they are closed and that does show some sense of concience on the managers part. It also shows that they are large for a reason-probably because of success!!

 

Looking at historical returns is not an indicator of future success in funds. So let's say for example a fund manager allocated a significant amount of technology companies to a fund(at a higher risk), say in the late 90ies, and the fund return was higher than other funds., Well the fund attracted the eye of those who measure success by past performance( and think that the manager is great or the fund is well managed, etc.. Well the hoard of people who bought into the fund at higher prices lost a significant amount of money when the fund returns dropped. In fact in cases like these some make money up front while many who invest later on loss signicant amount. This is true example, that not only happen in the 90ies, but at various times. It also happens, when the returns of fund are exagerated because the fund showed large success in different market segment such a the Fidelity low price fund which had been a low price value, and now a closet midcap index fund at a very high expense for what you get.

 

By the way you had also recommended the Harbor International fund. H Castegren the fund manager has been with the fund for many many years. How much longer will he be with the fund. Are you aware that the historical returns you might read about for this fund is biased, since about 2 or 3 years ago the expense ratio for the fund has been raised. The orginal fund share holders get the institutional expense ratio, much lower than new purchasers of the fund will pay. To make a point , I had owned this fund for over 10 years and enjoyed its success, and had been entitled to the instutional expense ratio, but last year I sold this fund since my asset allocation to international had significantly increased because of internation success. I did not sell any of my international index funds.

 

 

4. Active Management has a limited place for investors (even IRA admits to limited use of active management) who do their homework

 

Dan, I use active management where indexed equity funds are not available. I look for a broad based, low expense ratio fund, and wait for a index to come about in the category. I also use active management Vanguard bond funds where the expense ratios are similar to indexed bond funds.

 

 

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This is where I will give American Funds their due. They use a team approach, so that when one co-manager leaves (which is pretty rare. Those guys stay forever!), there is less adverse effect. Now, if they could just dump the sales load ...

 

AP, I know that you are versed in financial theory, and believe that past performance does not indicate future performance, however I sense that you feel that this fund will outperform their indexes in the future. If so, approximately what additonal expenses over an index charge would you be willing to pay.

 

 

But I also own Acorn Fund who had an impressive manager in Ralph Wenger, He retired and the fund is still just as good as ever because he some

good assistants . Its has beaten its index . It hasn't changed its strategies or philosphies

 

If I remember correctly Franklin(a load company) had acquired Acorn funds, so there is a load to buy in. Once again past performance is not an indicator of future performance. In this case the fund managers are new.

 

 

I also own Vanguard Health Care which I doubt you will critize

 

Of course I do not critize the past performance of the Vanguard Health Care fund. the category excelled during the last several years, and the fund itself did very well in the category. The cost for this managed fund is less than for other managed funds.

 

However past performance is not an indicator of future performance. Will the category excel in the future? I am currently invested in the health care market via a domestic stock market index. I see no reason to overweight this category( or any other category) because of past performance. I don't think that investing an extra amount in health care now will add to the diversification of my portfolio.

 

Tony, it seems that your recommendations for funds are based on past performance which were superior to the market. ONce again , studies have shown that past performance is not an indicator of future performance.

 

 

just wish I had started indexing in my twenties. Had I only known !!! I wouldn't have to sit here defending

my investment decisions

 

Tony, it's not about defending your investment decisions. It's about making the most of your investments. Any funds that you own in a deferred investment can be changed. If it's not a deferred investment, then you do the best to improve your future decisions. I for one, have made many mistakes and changes in my investments, and I believe that my investment decisions are still evolving.

 

 

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"AP, I know that you are versed in financial theory, and believe that past performance does not indicate future performance, however I sense that you feel that this fund will outperform their indexes in the future. If so, approximately what additonal expenses over an index charge would you be willing to pay."

 

Ira,

 

Nothing could be further from the truth! I have no faith whatsoever that American funds, or ANY funds, for that matter, will outperform indexes in the future. Given the choice between Vanguard/Fidelity index funds and American, I would take the former hands down. In fact, my money is where my mouth is: I own V/F/TRP index funds, but I do not own American at all.

 

I merely said that American is better than most in terms of manager tenure. Fund managers do not come and go very often, and even when they do, they are only part of a larger team of managers. I simply wanted to give some credit where credit was due. This was part of a larger discussion of manager turnover at actively managed funds, which I noted was an important reason for indexing.

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"AP, I know that you are versed in financial theory, and believe that past performance does not indicate future performance, however I sense that you feel that this fund will outperform their indexes in the future. If so, approximately what additonal expenses over an index charge would you be willing to pay."

 

Ira,

 

Nothing could be further from the truth! I have no faith whatsoever that American funds, or ANY funds, for that matter, will outperform indexes in the future. Given the choice between Vanguard/Fidelity index funds and American, I would take the former hands down. In fact, my money is where my mouth is: I own V/F/TRP index funds, but I do not own American at all.

 

I merely said that American is better than most in terms of manager tenure. Fund managers do not come and go very often, and even when they do, they are only part of a larger team of managers. I simply wanted to give some credit where credit was due. This was part of a larger discussion of manager turnover at actively managed funds, which I noted was an important reason for indexing.

 

 

To All,

It has taken about nine months to get Valic out of our system. However, my ultimate goal is a direct relationship with a low cost vendor. I have not achieved that goal. However, If I am not satisfied with the new vendor, I will petition the board, again.

 

My experience working with a consultant in the procurement process has been eye opening. If I had the power, my system would not use one. The consultant is not a stakeholder of interest in our system. Therefore, he could care less about who gets the business, as long as he gets paid.

 

The process is stacked against the low cost companies. Companies like Fidelity and Vanguard have reputations to uphold and do not want to promise that which they cannot deliver. The bottom feeders do not care. I asked the C.F.P. from one of the competing companies, What percentage in fees or costs is reasonable to pay for an investment? He never gave me a response. This is the type deceit that makes me sick.

 

I say all of this to let each one of you know the encouragement and strength I have received by hearing of the struggles of others on this board. I want to commend all of you for the tremendous job you do in helping teachers get a fair shake in the investment world.

 

Fe

 

 

 

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AS much as we do to stir the water here, unfortunetly only 18% of the American population invests in Index funds. Most investors are paying too much for their investments.

 

We are a minority and so we must be preaching to the choir to some degree.

 

 

Why can't more people get it? Financial Institutions and Insurance Companies are making too much easy money.Unions are getting in the act too at the expense of teachers by endorsing high fee providers.

 

Teachers need value. Index funds and low cost no load funds are simply the best choice for us.

 

 

Keep fighting for better choices!! Expect nothing less and eliminate those inrermediaries (sales people)

 

 

 

 

 

"AP, I know that you are versed in financial theory, and believe that past performance does not indicate future performance, however I sense that you feel that this fund will outperform their indexes in the future. If so, approximately what additonal expenses over an index charge would you be willing to pay."

 

Ira,

 

Nothing could be further from the truth! I have no faith whatsoever that American funds, or ANY funds, for that matter, will outperform indexes in the future. Given the choice between Vanguard/Fidelity index funds and American, I would take the former hands down. In fact, my money is where my mouth is: I own V/F/TRP index funds, but I do not own American at all.

 

I merely said that American is better than most in terms of manager tenure. Fund managers do not come and go very often, and even when they do, they are only part of a larger team of managers. I simply wanted to give some credit where credit was due. This was part of a larger discussion of manager turnover at actively managed funds, which I noted was an important reason for indexing.

 

 

To All,

It has taken about nine months to get Valic out of our system. However, my ultimate goal is a direct relationship with a low cost vendor. I have not achieved that goal. However, If I am not satisfied with the new vendor, I will petition the board, again.

 

My experience working with a consultant in the procurement process has been eye opening. If I had the power, my system would not use one. The consultant is not a stakeholder of interest in our system. Therefore, he could care less about who gets the business, as long as he gets paid.

 

The process is stacked against the low cost companies. Companies like Fidelity and Vanguard have reputations to uphold and do not want to promise that which they cannot deliver. The bottom feeders do not care. I asked the C.F.P. from one of the competing companies, What percentage in fees or costs is reasonable to pay for an investment? He never gave me a response. This is the type deceit that makes me sick.

 

I say all of this to let each one of you know the encouragement and strength I have received by hearing of the struggles of others on this board. I want to commend all of you for the tremendous job you do in helping teachers get a fair shake in the investment world.

 

Fe

 

 

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Teachers need value. Index funds and low cost no load funds are simply the best choice for us

 

Tony..........Than you for your posts..........when you say low cost no load managed funds, up to what expense ratio do you consider low cost?

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ira

 

To me,a low cost managed fund would equate less than 1% total expense ratio with no load. My average expense ratio is .70%. according to my Moringstar analysis. I wish it were a bit lower. I simply will not pay more than 1% now that i know better.

 

 

This is less than half what most people pay. Granted now that I am indexing in my new 403B this average should continue to fall albeit slowly. I can't easily sell all my managed funds and go to indexing completely because of tax consequences(outside of retirement plans) but I am making moves as I can to lower my costs any way I can without triggering taxes.

 

I think everyone is aware that higher costs do not equate to higher returns so the lower the better. That is been the mantra of this website, that cost is one thing you can control.

 

I just want to clear up a misconception. I am not a market timer and I don't chase performance. Most of the funds I have I have had for many years- because they have performed adequately I've kept them.

 

I am aware that not all funds will always be ###### as different assett classes may move up or down at different times or... move up or down together. I am also NOW aware that indexing would have served me better in the long run. Having said that I have to pat myself on the back for having started saving at a young age and have continued to dollar cost average into decent funds. This website was/is the most influential learning experience in my financial life. I sat back and read this site for many years until I felt confident enough to try and contribute. I've done well with my investments. You guys have helped with your lively exchanges and willingness to help others. And, I must say you guys don't beat around the bush-I like that!!

 

 

I am so deeply fustrated with my fellow teachers who are not involving themselves in the self learning process necessary to be a good investor and as a result are such easy prey for annuity salesmen.

 

I would love to have Dan Otter come to our school and knock some sense into our faculty!!

 

The more I try to explain to them the more they are signing up with these vultures even though we actually have Vanguard now available.

 

When I was younger I longed for individuals I could look up to and learn from. Today it seems nobody much wants to listen to those of us who have aquired some wisdom through the years. Its troubling.

 

Best Wishes,

 

Tony

 

 

 

 

Teachers need value. Index funds and low cost no load funds are simply the best choice for us

 

Tony..........Than you for your posts..........when you say low cost no load managed funds, up to what expense ratio do you consider low cost?

 

 

 

 

 

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Fe

 

Keep fighting the good fight. What you are doing will benefit teachers for years to come!! We need to turn the tide nationwide but its a slow process and it takes people like you to make it happen

 

Good Luck!!

 

Tony

 

 

 

 

 

"AP, I know that you are versed in financial theory, and believe that past performance does not indicate future performance, however I sense that you feel that this fund will outperform their indexes in the future. If so, approximately what additonal expenses over an index charge would you be willing to pay."

 

Ira,

 

Nothing could be further from the truth! I have no faith whatsoever that American funds, or ANY funds, for that matter, will outperform indexes in the future. Given the choice between Vanguard/Fidelity index funds and American, I would take the former hands down. In fact, my money is where my mouth is: I own V/F/TRP index funds, but I do not own American at all.

 

I merely said that American is better than most in terms of manager tenure. Fund managers do not come and go very often, and even when they do, they are only part of a larger team of managers. I simply wanted to give some credit where credit was due. This was part of a larger discussion of manager turnover at actively managed funds, which I noted was an important reason for indexing.

 

 

To All,

It has taken about nine months to get Valic out of our system. However, my ultimate goal is a direct relationship with a low cost vendor. I have not achieved that goal. However, If I am not satisfied with the new vendor, I will petition the board, again.

 

My experience working with a consultant in the procurement process has been eye opening. If I had the power, my system would not use one. The consultant is not a stakeholder of interest in our system. Therefore, he could care less about who gets the business, as long as he gets paid.

 

The process is stacked against the low cost companies. Companies like Fidelity and Vanguard have reputations to uphold and do not want to promise that which they cannot deliver. The bottom feeders do not care. I asked the C.F.P. from one of the competing companies, What percentage in fees or costs is reasonable to pay for an investment? He never gave me a response. This is the type deceit that makes me sick.

 

I say all of this to let each one of you know the encouragement and strength I have received by hearing of the struggles of others on this board. I want to commend all of you for the tremendous job you do in helping teachers get a fair shake in the investment world.

 

Fe

 

 

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Hi Tony , Thanks for the well written post.

 

 

To me,a low cost managed fund would equate less than 1% total expense ratio with no load. My average expense ratio is .70%. according to my Moringstar analysis. I wish it were a bit lower. I simply will not pay more than 1% now that i know better
.

 

Keep on working on making your expense ratio lower. I've been concentrating on expense ratio during the last few years. Mine is currently 0.17

 

In John Bogle's book Common Sense on Mutual Funds, you will see that 1 percent is too high.

By the way Vanguard as you probably know expense ratio of managed funds is about .4 or .5, and there are index funds available in virtually every category at a signifcantly lower expense; another source is Fidelity Spartan indexes.

 

 

I am so deeply fustrated with my fellow teachers who are not involving themselves in the self learning process necessary to be a good investor and as a result are such easy prey for annuity salesmen.

 

I would love to have Dan Otter come to our school and knock some sense into our faculty!!

 

The more I try to explain to them the more they are signing up with these vultures even though we actually have Vanguard now available.

 

When I was younger I longed for individuals I could look up to and learn from. Today it seems nobody much wants to listen to those of us who have aquired some wisdom through the years. Its troubling.

 

Welcome to the club. All of us who post meet similar resistence. I have well educated friends and family who are not interested for a variety of reasons in learning about the investment strategies that I can share, but instead make themselves available to sharks. It's frustrating because I really believe that I know what I'm talking about.

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