Investing Diversification Issue Vanguard vs VG HealthCare

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Investing Diversification Issue Vanguard vs VG HealthCare

Postby gtag » Thu Apr 04, 2013 9:45 pm

Hello everyone,

This is my first post and a relative newbie to the forum. I have learned much reading through the select few posts so far and I have gained much knowledge from many intelligent posters. I have seen many posts talking about diversification with VG mutual funds. I do understand the theory behind it. I am having trouble understanding why you need a variety of funds to diversify, for example, having a total stock market index, total international fund index, and a total bond index. Where looking at past performance (I know past performance does not guarantee the same future results), why can you not just invest all of your money in let us say the VG HealthCare fund? It has shown to outperform those combined in the long run. I know there are probably more factors involved. I am very interested in hearing your comments.

Thank you,
Greg
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby grabiner » Thu Apr 04, 2013 10:32 pm

gtag wrote:Where looking at past performance (I know past performance does not guarantee the same future results), why can you not just invest all of your money in let us say the VG HealthCare fund? It has shown to outperform those combined in the long run. I know there are probably more factors involved.


Any sector fund will outperform the market at some times, and underperform it at others, based on what happened to the sector. And when a sector does badly, it does very badly; consider what happened to technology in 2000-2002 and to finance in 2007-2009. This is why you don't want to have too much of your portfolio in any one sector; you take a lot more risk. If you have broadly diversified funds (which need not be indexes), and one sector loses half its value, you won't be hurt badly.

The reason health care has done well recently is that it wasn't the sector which was crushed in either of the last two bear markets, but investors in technology discovered in 2000 that past performance was not an indication of future results.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby rickmerrill » Fri Apr 05, 2013 1:31 am

gtag wrote:Hello everyone,

I have seen many posts talking about diversification with VG mutual funds. I do understand the theory behind it. I am having trouble understanding why you need a variety of funds to diversify, for example, having a total stock market index, total international fund index, and a total bond index.


Greg,

These are different asset classes that are being represented in the three funds. Sometimes one asset class gets clobbered and another does the opposite or at least not as bad. Basically it is spreading the risk between US stocks, international stocks and bonds. The three are needed because they cover most of the entire market. If you don't know what will do well ahead of time, you don't, you invest in it all in the appropriate proportions, keep your costs as low as possible and take as much as it gives you. If you have simple needs you can do the same thing with one good balanced fund but it would basically hold those same three asset classes in the proportions you feel match your risk tolerance.

A sector fund like healthcare does not cover the entire market so anyone that invests only in it is making a bet that they know something the market doesn't know.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby tibbitts » Fri Apr 05, 2013 8:28 am

gtag wrote:Hello everyone,

This is my first post and a relative newbie to the forum. I have learned much reading through the select few posts so far and I have gained much knowledge from many intelligent posters. I have seen many posts talking about diversification with VG mutual funds. I do understand the theory behind it. I am having trouble understanding why you need a variety of funds to diversify, for example, having a total stock market index, total international fund index, and a total bond index. Where looking at past performance (I know past performance does not guarantee the same future results), why can you not just invest all of your money in let us say the VG HealthCare fund? It has shown to outperform those combined in the long run. I know there are probably more factors involved. I am very interested in hearing your comments.

Thank you,
Greg

You could have asked the same question at one time or another about any of the outperforming funds of the past - Magellan, for example. You might want to read some of its history. You don't see a lot of posts (even on Fidelity forums) about investing in it today. Even here on a VG forum, we don't hear much about Windsor - one of the very highest performing funds of many decades ago. After that, not so much. Generally, even with "legendary" funds, how well you do depends on exactly when you get in and get out. Incidentally, are you aware that the person who managed VG Healthcare through all those outperforming years no longer manages the fund?

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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby KyleAAA » Fri Apr 05, 2013 8:34 am

The Healthcare fund is not at all diversified. Having a portfolio solely invested in that fund would have a risk factor off the charts.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby johnep » Fri Apr 05, 2013 9:10 am

VG HC has outperformed VG TotalStk the past 10 years. It is a very good sector fund, but healthcare, like any other sector, can fall out of favor due to any number of potential mega issues: thinner profits through reduced rates from insurance and medicare, the new govt healthcare program (it remains to be seen if this will help or hurt), a lack of new drugs in pipeline and any number of issues. It could be a nice niche holding in an otherwise well diversified portfolio. However, to rely heavily upon this fund or sector is risky, as it could go through an elongated period of underperformance.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby Scooter57 » Fri Apr 05, 2013 10:57 am

Many blockbuster drugs are coming off patent now with few strong candidates to replace them. This is another factor to consider when looking at that fund, which is full of Big Pharma.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Fri Apr 05, 2013 4:14 pm

Thanks everyone. I appreciate all of the comments. I am soaking it all in. I will address some comments in no particular order. I know that the VG HC fund is a sector fund is focused on one sector and I am not diminishing some of the risks in sector funds.

I find it interesting through that even though the majority of the funds are in HC but according to Mr. Owens the former manager, he had the fund invest in more value HC stocks and it also diversifies in foreign, Pharms, biotech (which he felt were one category), and med devices to name a few and again I know this is mainly in HC.

I also understand Mr. Owens has stepped down but Ms. Jean Hynes has taken over who has been with him for a while learning and working with him. It has been commented she will be basically using the same investing style like Mr. Owens. I do understand that when Peter Lynch left Magellan that the fund has not been the same I think. Are there some concerns with the same happening with the VG management switch? Sure why would there not be some. I will see how it plays out.

Again, I know that the past can not be a great predictor of the future, but if you do comparisons with some the the top VG index funds, it looks to me like the HC funds outperforms them all since the HC funds inception date back in 1984. I know from reading some of the old comments from Mr. Owens that he did feel he started the HC fund after the HC sector had been beaten up for a while but even with that it has an average return over the 30 years of a little over 16%.

I guess I am wondering why the HC fund is a little over looked?

I understand that there is big pharma having many patents expiring, but I have heard there are more being approved and ready for testing with the increase in medications being introduced by biotech companies.

I think I have written enough for now. What are some of your thoughts and/or concerns with these comments?

Thank you everyone,
Greg
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby Scooter57 » Fri Apr 05, 2013 4:59 pm

There are no blockbusters in the pipeline to make up for the loss of drugs like Lipitor, Plavix, Seroquel, and Actos which were taken by many millions of people. These drugs are being replaced by generics. The new drugs for diabetes either don't outperform the generics and have very serious side effects just coming to light that make it unlikely they will have the success of earlier drugs.

The biotech companies don't have blockbusters in the pipelines. There are some extremely expensive cancer drugs that extend life by maybe 3 months, but with the cost pressure health care is facing, it isn't likely they are going to get the kind of sales that would replace a workhorse like Lipitor.

The recent decision by the Indian Supreme Court that drug companies can't extend patents with making tiny, insignificant changes in their drug has a huge impact on international sales too. India is a huge producer of generic pharmaceuticals sold world wide.

Bottom line: the market knows a lot more about sectors than you do and judging future performance based on the past always gets you into trouble. In this case, the past performance of Big Pharma had a lot to do with factors that aren't likely to operate going forward.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby Dandy » Fri Apr 05, 2013 6:08 pm

Putting all your investment "eggs" in the VG heath care fund is not being diversified. You are selecting a small segment of the US market and trusting that that segment will do well for the foreseeable future. True that fund has been a very good performer. But, every industry group has risks and the health care industry is no different. Regulation, changes in insurance coverage/reimbursement, court decisions, product liabilities, competition etc could all cause long term problems and therefore declining stock prices.

Awhile ago I tried to invest directly in stocks vs funds. One stock I chose was a major drug company with a high dividend. How could that go wrong given the aging population? Well soon after the purchase the company had a major issue with one of their drugs and was sued for billions. The stock price plunged overnight and I don't believe it has yet to return to my purchase price. The risk of owning one stock is very high. The risk of owning just a segment of the market is also quite high -- not has high as an individual stock but still higher than owning the market. Everyone "knows" that we have an aging population that will need more medical attention from drugs to testing to replacement hips etc. That knowledge is probably built into the price of the companies in the health care fund.

So, if you want to put some of your investment in the health care fund - that is ok. but to think of it as your sole holding is very risky. Investing can be very simple but just looking at some prior performance and bettng the farm on it is a bit too simple.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Fri Apr 05, 2013 6:15 pm

Scooter57,

I appreciate your reply. It is very informative for me. Don't you feel that the health care sector will always be needed (i know so does food and transportation, etc)? Don't you feel someone will come up with newer meds,med devices, etc? If you were to pick a portfolio for retirement and you had 20-25 years until your retirement, what would you invest in and at what percentages? Thank you for all of your knowledge on this topic.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Fri Apr 05, 2013 6:40 pm

Dandy,

I just saw your post. Thank you for all of your knowledge. I do not disagree with you that there is more risk investing in one stock than one mutual fund and there is more risk investing in a sector mutual fund than a total stock market index fund. All of your concerns you listed in your reply are definite and legitimate concerns and does cause some hesitations for me in the HC fund. However, I have been Dollar Cost Averaging in the fund since 1999. I have definitely experienced the roller coaster ride with the HC fund especially a couple of down stretches in early 2000s and around 2008 range. I was able to ride it out and come back strong because of my long investing time frame. I know there are going to be down times but in the long run, it seemed like the HC sector has outperformed most sectors and/or indexes on average per year. At these times, didn't all sectors and indexes take big hits as well? As I asked Scooter57, if you had 20-25 years until retirement, what would you invest in your Roth IRA / IRA and what would be your percentages? I appreciate your knowledge on this.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby momar » Fri Apr 05, 2013 7:10 pm

Why is it when people post "I know past performance..." they invariably add "but the past performance...."?
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby john94549 » Fri Apr 05, 2013 7:13 pm

I have a trading (aka "fun money") account in which I make sector bets, short bets, bets on which fly wins the crawl up the wall, you name it. My Vanguard Health ETF has done well.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby Scooter57 » Fri Apr 05, 2013 8:26 pm

For a long time frame I personally would go with the broad index funds--Total Stock Market or one of the S&P 500 funds and a Total International fund for the rest of the world. Because they are cap weighted you get significant holding in big pharma when you buy those funds.

To capture some of those smaller, innovative companies, you can invest in the Vanguard Small Cap fund and perhaps a very small dose of an International Small Cap fund, which will include la bunch of the smaller companies that develop the drugs big pharma buys.

The problem with buying the past decade's hot sector is that everyone who thinks like you are thinking now is buying that sector, pushing up the price. Some other sector will start to pop this next decade and people will sell the no longer red hot health care funds, so it becomes harder for your health care fund to maintain its gains even if the investments it holds are all doing exactly as well as expected.

25 years ago I started buying mutual funds and chose them using logical ideas like the ones you are entertaining now. What I learned is that logical people always invest in things that lag the overall market, because if the logic supporting buying something is clear enough that an amateur can figure it out, the big boys have already bought on that logic--a few years before--and will be delighted to sell to us late comers so they can take their profits and get into the next big--not obvious to amateurs thing.

So now I pretty much stick to the simple indexing strategies laid out by Markiel and explained best by William Bernstein in Four Pillars of investing.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby grabiner » Fri Apr 05, 2013 9:29 pm

gtag wrote:I appreciate your reply. It is very informative for me. Don't you feel that the health care sector will always be needed (i know so does food and transportation, etc)?


The sector will always be needed, but everyone else knows that as well, so the expectation is already priced in. As a result, investors are willing to pay more today for $1 of lower-risk earnings in the health-care sector or the utilities sector than for $1 of earnings in the higher-risk financial sector. (M* category averages: price/earnings is 17 for health care, 16 for utilities, 10 for financials.)

And health care does have its own risks, particularly government regulation. Changes to Medicare can have a major effect on health-care stocks in the US.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sat Apr 06, 2013 6:18 am

Momar,

No worries here. I thought this is a learning forum- just trying to learn as much as I can especially from investors who have been around doing this for a while. So I will pose the same question to you as a did a couple other posters here and add one question. First, if you had 20-25 years until retirement, what types of funds would you invest in and what percentages would you put in each fund? Second, what information do you use when evaluating mutual funds? Thank you.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sat Apr 06, 2013 6:27 am

John94549,

No worries as well as I replied to momar. Again, I thought this was a learning forum just trying to learn as much as possible from investors who have been doing this for a while. Besides your VG HC etf, if you had 20-25 years left until retirement what would you invest in and at what percentages? Also, how do you determine what mutual funds you invest in? Thank you.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sat Apr 06, 2013 6:58 am

Scooter57,

I do appreciate you taking your time to share your knowledge. It is a great point you bring up with your statement [quote="Scooter57"]
25 years ago I started buying mutual funds and chose them using logical ideas like the ones you are entertaining now. What I learned is that logical people always invest in things that lag the overall market, because if the logic supporting buying something is clear enough that an amateur can figure it out, the big boys have already bought on that logic--a few years before--and will be delighted to sell to us late comers so they can take their profits and get into the next big--not obvious to amateurs "

So, you are basically saying that even though the VG HC sector fund has had a good run for these approximately 30 years and this has been factored in by the experts so it could be in the somewhere future be ready for a big bust. Just stay in broad market index funds to minimize the risks associated with this.

I will have to look for the book you recommended in The Four Pillars of Investing. Are there any other books that you recommend?

Again, I appreciate you sharing your knowledge.

Greg
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sat Apr 06, 2013 7:09 am

Grabiner,

I also appreciate your comments. It is also a good point you bring up with your comments,

"The sector will always be needed, but everyone else knows that as well, so the expectation is already priced in. As a result, investors are willing to pay more today for $1 of lower-risk earnings in the health-care sector or the utilities sector than for $1 of earnings in the higher-risk financial sector. (M* category averages: price/earnings is 17 for health care, 16 for utilities, 10 for financials.)

And health care does have its own risks, particularly government regulation. Changes to Medicare can have a major effect on health-care stocks in the US.[/quote]"

I know what you are saying about Medicare changes. I think they just said recently in the news that Medicare payments would be increased more to the medical community. However, as you have stated, how do we know in the future that this will be the case?

I will ask you as well as some of the other posters and anyone else willing to chime in on my question. If you had 20-25 years to retirement, what funds and percentages of those funds would you invest in now?

Thank you again for all of your help and knowledge.

Greg
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby Carl53 » Sat Apr 06, 2013 7:30 am

Back in the 80s and early 90s we had virtually all of our IRAs in VGHCX. It was great but was more volatile than I could stand as I exchanged some out during large downswings. Overall it still paid a handsome return. Still hold some today, but it is but 5% of our overall portfolio.

Since you are young and want to put money in, it very well may be a big winner over time. Please plan on diversifying out when it is doing very well as opposed to what I did. Pick a number that if it grows to, that signifies that it is time to diversify.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby john94549 » Sat Apr 06, 2013 8:04 am

gtag, a person 20 - 25 years from retirement has the ability to assume a tad more risk than, say, a person who is retired.

Accordingly, under commonly-accepted guidelines, the younger person might plunk a tad more in equities than the older person.

That said, there is no mechanistic, one-size-fits-all, asset allocation. My wife and I chose "age-in-bonds" due to its elegance and simplicity. However, folks with much more (or much less) might elect a different allocation.

Not trying to beg the question, here. As a general rule, "age-in-bonds" is a tried-and-true formula. Easy to calculate; easy to apply. Worked for us.

Purists will note that a "floor" of 25% equities, even while using "age-in-bonds", is wise. I would agree.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sat Apr 06, 2013 8:50 am

Carl53,

I appreciate the reply and your personal situation experiences. I will definitely keep all of your advice in mind. In the past year or so, I have been definitely been considering reallocating my portfolio to try to maximize returns and minimize risks like most investors. Thank you for all of your comments.

Greg
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sat Apr 06, 2013 8:59 am

john94549,

I appreciate your reply and personal experiences. As I told Carl53, I have been considering, reallocating my portfolio again to try to maximize returns and minimize risk. I do have a tendency to have a slightly higher risk because I have a little more time to retirement. Having said this, I do not want to be just an irresponsible investor either. I guess I will keep researching information and taking in all the information I can from experienced people and investors as yourself. It definitely is a big help to me and all who are reading these posts. I hope I keep getting more replies to learn from veteran investors to learn as much as I can to increase my knowledge and hopefully my returns. Thanks again.

Greg
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby Dandy » Sat Apr 06, 2013 9:07 am

gtag
You asked what I would invest in with 20+ years to retirement. I would invest in the Total Stock Market 30%, Total International Stock market 15%, Small Cap blend 7.5%, and REIT 7.5% on the equity side. Fixed income is a mess right now. I'd rather just have total bond market and short term index. But now I would add Intermediate or short term corp and some "safe" (no loss of principal) investments (EE bonds, I bonds, CDs, Stable Value funds, etc). If interest rates ever go back to "normal" intermediate treasury would be a great option.

Or -- Life Stragegy moderate growth - My daughter is in the Star fund - trying to get her to move to a lower cost balanced fund like Life Strategy. My other daughter is in Life Strategy growth (I think).

My point is not the specific allocation but using broad based low cost index funds vs going all in on a sector fund--even on as successful as Health Care.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby momar » Sat Apr 06, 2013 10:36 am

gtag wrote:Momar,

No worries here. I thought this is a learning forum- just trying to learn as much as I can especially from investors who have been around doing this for a while. So I will pose the same question to you as a did a couple other posters here and add one question. First, if you had 20-25 years until retirement, what types of funds would you invest in and what percentages would you put in each fund? Second, what information do you use when evaluating mutual funds? Thank you.

If I had perfect freedom, I would buy Total World Stock and a Total Bond that really was total. Every bond. That latter doesn't exist. At a ratio of 75/25.

Since I don't, I own Total Stock, Total International Stock, and Total Bond. Some of those are recreated with things like 500/Extended Market and FTSE All World ex-us/FTSE All World ex-US Small. At more or less 75 stock (50/50 TSM/TISM) and 25 bond (various Agg bond index funds).

I guess I could try to create a more total bond fund by buying pieces of other kinds of bond funds, but I prefer simplicity to the marginal gain from splitting up 25% of my portfolio.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sat Apr 06, 2013 10:59 am

Dandy,

Thank you for your knowledge and personal experiences. It is always a help to me and other investors. I have been and continue to look at reallocation on my retirement investments. I do have concern about all eggs in one basket. I guess it must be a negative thing to look at all data especially in the past when looking at funds. I will have to look into more diversification. Is it not true that when Interest rates move back up that bonds and bond funds will be at lower prices? Again, I appreciate all the knowledge and experiences. Thank you.

Greg
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sat Apr 06, 2013 11:11 am

Momar,

I appreciate your reply with your knowledge and personal experiences. I am just curious and if you do not want to answer because it is personal, I completely understand. Why can't you invest in a Total World Stock and a Total Bond fund for yourself? I think in your earlier reply, at least in the Total Bond fund, is because it is not offered, correct? Why not in a Total World Index Fund- I think VB offers one don't they? I know in your first reply to me that you are not a fan of past performance when looking at funds, correct? Do you look at any information when choosing a fund? Do you believe sector funds are a waste of time and why? I just like to know because I like gathering as much information as I can to help me along the investing track from investors like you who have many experiences and knowledge to share. Thank you for sharing your information with me and other viewers.

Greg
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby momar » Sat Apr 06, 2013 11:15 am

gtag wrote:Momar,

I appreciate your reply with your knowledge and personal experiences. I am just curious and if you do not want to answer because it is personal, I completely understand. Why can't you invest in a Total World Stock and a Total Bond fund for yourself? I think in your earlier reply, at least in the Total Bond fund, is because it is not offered, correct? Why not in a Total World Index Fund- I think VB offers one don't they? I know in your first reply to me that you are not a fan of past performance when looking at funds, correct? Do you look at any information when choosing a fund? Do you believe sector funds are a waste of time and why? I just like to know because I like gathering as much information as I can to help me along the investing track from investors like you who have many experiences and knowledge to share. Thank you for sharing your information with me and other viewers.

Greg

I don't own those because we have work place plans that don't offer them. I own funds in each account (IRA, IRA, taxable, 401k, 457) in a manner designed to get the lowest possible expense ratio with the minimum tax impact.

When choosing funds, I choose based on owning the entire market and based on expense. I would also choose based on how closely the fund tracks its index.
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sat Apr 06, 2013 12:24 pm

Momar,

Thank you again. I appreciate the information and knowledge. I do not want to assume what you are thinking. If I can deduct some theories from some of your earlier comments, do you feel that it is better to try to match the entire investing market as possible minus the lowest possible expenses because you feel, in general, it is better to try to match the returns of the market as close as possible (if you can not beat them join them)? And that, sector funds which may be profitable at times but in the long run will not match the entire investing market? Again, just trying to gather as much investing knowledge as possible. I will be gone for a little while today so I may not be able to reply until latter.

Thanks again.
Greg
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby momar » Sat Apr 06, 2013 1:09 pm

gtag wrote:Momar,

Thank you again. I appreciate the information and knowledge. I do not want to assume what you are thinking. If I can deduct some theories from some of your earlier comments, do you feel that it is better to try to match the entire investing market as possible minus the lowest possible expenses because you feel, in general, it is better to try to match the returns of the market as close as possible (if you can not beat them join them)? And that, sector funds which may be profitable at times but in the long run will not match the entire investing market? Again, just trying to gather as much investing knowledge as possible. I will be gone for a little while today so I may not be able to reply until latter.

Thanks again.
Greg

More or less.

I buy the entire market because I don't have any knowledge that the rest of the market doesn't have. In fact, I almost certainly have much less. Just because I have a particular degree and work in a particular field doesn't mean I know more about its future profits than others. Even if I did, that doesn't help. Because in order to determine whether a particular company or sector is going to outperform, I need to be able to properly evaluate every other company and sector.

Even if I was reasonably convinced that tilting my portfolio away from the total market will give me an extra percent in the long run, I am not 100% sure. And I have been warned and have seen that, for example, Small Cap Value funds can underperform for long periods of time. Yes, everyone says they are in it "for the long term" and not worried about day to day fluctuations. This is especially true with posts from young people (I am one!).

I don't think people understand what the long term really means. For someone like me, it may mean as long or longer than I have been alive. It may mean I may go my entire working career without that reward showing up until the end. Am I really prepared to underperform for decades and stay the course? No, and I doubt most people posting here are prepared to do that either. As evidenced by the fact that they are essentially chasing a fad to try to goose their returns; I don't refer to those that might really understand it (EDN, Rick, Larry, whomever), but the average person who writes:

"I finally decided on a portfolio. I am going to do a small value tilt of 20%, because I am in it for the long haul."

I am sure if I had been around long enough to see many other popular investment strategies, I could substitute those in for "small value tilt" and the same kind of people would be posting the same kind of thing.

It is an unfortunate consequence of our mortality that we do not know whether we are suited for things like this until the time and opportunity has passed us by.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sat Apr 06, 2013 6:24 pm

Momar,

Thanks for the reply and the personnel knowledge. I understand what you are saying. I am going to have to look hard at mine to reevaluate what to do. The information you gave me will definitely benefit me. Thanks again and good luck to you in your investing career. I hope to be crossing paths with you again as well as the other posters who have helped me along. I greatly appreciate the insight and any more savvy advice and personal experience is greatly welcomed. Thank all of you.

Greg
Last edited by gtag on Sun Apr 07, 2013 1:00 am, edited 1 time in total.
gtag
 
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby grabiner » Sun Apr 07, 2013 12:11 am

gtag wrote:Grabiner,

I also appreciate your comments. It is also a good point you bring up with your comments,

grabiner wrote:The sector will always be needed, but everyone else knows that as well, so the expectation is already priced in. As a result, investors are willing to pay more today for $1 of lower-risk earnings in the health-care sector or the utilities sector than for $1 of earnings in the higher-risk financial sector. (M* category averages: price/earnings is 17 for health care, 16 for utilities, 10 for financials.)

And health care does have its own risks, particularly government regulation. Changes to Medicare can have a major effect on health-care stocks in the US.
"

I know what you are saying about Medicare changes. I think they just said recently in the news that Medicare payments would be increased more to the medical community. However, as you have stated, how do we know in the future that this will be the case?


The point is that I don't know; there are risks specific to the health-care sector, just as there are risks specific to any other sector (conditions in the Middle East affecting oil prices, changes in depreciation rules affecting real estate, accounting scandals affecting bank stocks, rising oil prices affecting trasportation). If you put too much in any one sector, you take an unnecessary risk.

I will ask you as well as some of the other posters and anyone else willing to chime in on my question. If you had 20-25 years to retirement, what funds and percentages of those funds would you invest in now?


There is a lot more to determining an asset allocation than just the time to retirement; if you want this type of advice, start a new thread and post your situation in the form requested: Asking Portfolio Questions

(edited to fix quoting)
Last edited by grabiner on Sun Apr 07, 2013 11:42 am, edited 1 time in total.
David Grabiner
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sun Apr 07, 2013 1:06 am

Grabinar,

Thank you. I will have to start the new post as you suggested. Either now or sometime tomorrow, hopefully. Thanks for the advice.

Greg
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby Scooter57 » Sun Apr 07, 2013 10:43 am

gtag,

I found William Bernstein's Four Pillars of Investing the best of all the books I read, though I read it after reading all the others, and since it takes a few exposures for an idea to sink in it is possible that I appreciated it more because I had already had some exposure to the fundamental ideas he cites. That said, I thought there were some things he discussed in more detail than the other books. But I would read them all.

Other books I read that I would recommend:

The Investor's Manifesto, William Bernstein's "easy reader" version of Four Pillars, Reading both is helpful.
A Random Walk Down Wall Street/Burton Malkiel
Value averaging :the safe and easy strategy for higher investment returns /Edleson, Michael E.
Stocks for the Long Run/Jeremy Siegel
Bonds :the unbeaten path to secure investment growth / Stan and Hildy Richelson
The vigilant investor :a former SEC enforcer reveals how to fraud-proof your investments /Huddleston, Pat.
The big investment lie :what your financial advisor doesn't want you to know /Edesess, Michael.
25 stupid mistakes you don't want to make in the stock market /Rye, David E.
The only guide to a winning bond strategy you'll ever need /Swedroe, Larry E.
Bogle on mutual funds :new perspectives for the intelligent investor /Bogle, John C.
The Warren Buffett way :investment strategies of the world's greatest investor /Hagstrom, Robert G.,

Some of these books I found in the stacks at my local public library, or I would never have discovered them. Check out the online listings of your public library to see what investing titles they hold.
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Re: Investing Diversification Issue Vanguard vs VG HealthCar

Postby gtag » Sun Apr 07, 2013 4:16 pm

Scooter57,

Thanks for the list of books. I have been looking at reviews on William Bernstein's Four Pillars of Investing. From the reviews, it does look like an outstanding book. I have the book on order at the local library. So, I am anxiously awaiting when it comes in. I am also going to be starting a new post on the this forum suggested by Grabinar to get more advice on my portfolio or lack there of one. Hopefully, you can give me some more insight and knowledge on it. Thanks for the information.

Greg
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