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sschullo

Hitting it big on

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Everytime the market is as rip roaring as it has been since 2008 (with occasional short term hiccups), some people are lucky with their short-term, overnight get rich, style. Of course there will be some people who made it big on Tesla stock. There are many problems with reporting about this kind of "investing" but the first one is that there is no follow up that I know of five or ten years down the road. 

To nobody's surprise for the regulars here, and from all the books that I have read, this is how NOT to invest: https://www.morningstar.com/news/dow-jones/20201227504/investors-double-down-on-stocks-pushing-margin-debt-to-record This is anadulterated g ambling! 

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I've  known some folks like these who because of some lucky bewildering short term gains developed irrational exuberance. Once they luck out  a few times many arrogantly think they know something  others don't and they continue their investing tendencies.  They abandon basic investment principles .It  usually never ends well.  We only hear about the short term euphoria and never how many end up losing more than they ever made. 

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Does this mindset of chasing returns even factor into actively managed funds?  My wife had shares of Vanguard International Growth Fund Admiral Shares (VWILX) and I was amazed at their returns compared to the benchmark.  Then I dug into their holdings and Tesla was #1, which is confusing to me since the fund is supposed to focus on "non-U.S. companies with high growth potential."  I took it as an opportunity to re balance instead of chasing more returns.  Also an opportunity to go from a .33 expense ratio to a .11.

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14 hours ago, CTinker said:

Does this mindset of chasing returns even factor into actively managed funds?  My wife had shares of Vanguard International Growth Fund Admiral Shares (VWILX) and I was amazed at their returns compared to the benchmark.  Then I dug into their holdings and Tesla was #1, which is confusing to me since the fund is supposed to focus on "non-U.S. companies with high growth potential."  I took it as an opportunity to re balance instead of chasing more returns.  Also an opportunity to go from a .33 expense ratio to a .11.

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Consider your wife extremely lucky that she hit it twice, growth and international went through the roof in 2020.  

Good for you for rebalancing out of this fund, or at least reducing your exposure. 

Might be due to style drift. Managed funds often do this when the stocks are doing great, especially Tesla this year! OMG! You have to dig deeper into the prospectus to find out why Tesla was an exception because you are right, Tesla should not be in this fund. The data says this fund invests 14% of its holdings in the U.S. https://investor.vanguard.com/mutual-funds/profile/portfolio/vwilx

Your experience is exactly why I do not invest in such a narrow part of the market. I really don't know if my portfolio is diversified, as you found out, as time goes by. You might as will be invested in Tesla stock!

Interestingly, 58% is what my portfolio returned in 1999 with the tech bubble, and you know don't want to know what happened to my portfolio 2 years later. 

Since those terrible years 20 years ago, I have my money in broadest diversified index funds, only two equity funds. Total Stock market index and total international stock market index and a balance fund, Wellesley.  

 

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Does this mindset of chasing returns even factor into actively managed funds? 

 

 

For you guys new to investing blunders by mutual fund companies , all you need to do is research the style drift experts of the past called Janus funds as a classic example. They rode heavily in  certain  TECHNOLOGY stocks while pretending to be a  diversified fund outfit. I foolishly invested   in 4  of their funds with them for a while thinking I had a diversified portfolio. Turned out every one of their funds loaded up on the same  few high fliers. Dishonest outfit that eventually went down in flames. I lost a ton . Trust me, what we profess here is absolutely the right approach. Of course, Vanguard  managed funds are not like Janus but you should always check to see how concentrated their managed funds are. Vanguard's managed funds are decent and low cost but Vanguard's strength will always be their iconic index funds.

Incidentally, Mr Bailey is very very rich from his tenure at Janus funds during this  era even though his antics left many unsuspecting investors broke . He got the goldmine , we got the shaft.

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