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tony

The Best Vanguard Funds To Buy Might Not Be Index Funds

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Low costs seems to matter in both active and index funds. The current thought is that active funds will now outperform because all stocks won't all rise going forward but certain stocks will. That stock picking matters.If you prefer active management it seems Vanguard managed funds would be the only good alternative to index funds because of very low expense ratios. I will stick to index funds even though there might be some truth to a coming possible shift.

 

 

 

https://www.forbes.com/sites/michaelfoster/2017/04/14/here-are-the-best-vanguard-funds-to-buy-theyre-not-the-ones-you-think/#65f58c7499c2

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This is very interesting. Thanks for sharing Tony!

 

I might have to consider some of these if I ever get Vanguard approved by my employer. I have already been interested in their actively managed Core Bond Fund (launched in 2016) because I buy into the belief that an actively managed bond fund makes sense. In my IRA I tend to do ETFs, so I do not have access to managed funds without changing my philosophy.

 

I planned to soon put my HSA funds into Wellington as it has limited offerings at that bank.

 

I do believe low costs are key, so if it is a low cost Vanguard fund, even if actively managed, there is an argument to be made both ways.

 

Thanks for keeping my mind active on this!

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Saab93,

 

I urge you to consider the source: that article is written by somebody whose business is to persuade people to pay him for superior insights into future market performance and "hidden" opportunities. While there's no doubt that the relatively low fees and conservative management principles used by Vanguard's active managers give their funds a smaller chance of underperforming the market by a wide margin than higher-priced, more active funds, there's no evidence that they will outperform in the future without having taken on an enhanced level of risk. (Note that the author's highly selective "long term" data only goes back 12 or 15 years.)

 

I recommend "A Random Walk Down Wall Street" by Burton Malkiel—it includes an extensive (and devastating) analysis of the various methods of active management.

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Whyme and Saab 93

 

 

I didn't post this to turn folks toward active funds , Its just an opinion piece .But if I only could choose active funds I would hope they would be Vanguards

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Whyme and Saab 93

 

 

I didn't post this to turn folks toward active funds , Its just an opinion piece .But if I only could choose active funds I would hope they would be Vanguards

 

Thanks tony!

 

Completely understand why you posted it! I like the opportunity to think about it.

 

My core investing is going to remain index for the foreseeable future, but something like my HSA could change because it has limited offerings.

 

Whyme - I appreciate that you keep me thinking sensibly and not get ahead of myself.

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Low costs seems to matter in both active and index funds. The current thought is that active funds will now outperform because all stocks won't all rise going forward but certain stocks will. That stock picking matters.If you prefer active management it seems Vanguard managed funds would be the only good alternative to index funds because of very low expense ratios. I will stick to index funds even though there might be some truth to a coming possible shift.

 

 

 

https://www.forbes.com/sites/michaelfoster/2017/04/14/here-are-the-best-vanguard-funds-to-buy-theyre-not-the-ones-you-think/#65f58c7499c2

 

 

"These have all returned over 17% annually since inception. Why is this?"

 

Pretty easy question to answer......anyone can do this math.

  • Dividends: 2%
  • EPS growth 4%
  • P/E ratio multiple expansion: 11% This is what the Fed did via QE....... changed the valuations to the 2nd highest in history (ex dot com bubble)
  • = 17% a year

 

So Future returns (10-12 years) are now close to zero using the same math. Unless multiples don't contract/mean revert to 15X or 10X

 

FYI: valuations never stay constant especially P/Es above 20X (or below 10X)

 

The John Bogle Expected Return Formula

http://awealthofcommonsense.com/2016/09/the-john-bogle-expected-return-formula/

 

 

long term returns are not random because anyone can walk you through this math.

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