Fund Advice from Advisor - S&P500 Performance

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
jstar32
Posts: 12
Joined: Fri May 10, 2013 12:14 pm

Fund Advice from Advisor - S&P500 Performance

Post by jstar32 »

Hey folks,

John here, first time poster. I'm trying to discern if what my financial advisor at Merrill Edge is telling me is accurate regarding a specific fund's performance vs the S&P - taking into account the expense ratio.

May I ask, does this performance graph take into account annual expenses? My advisor says after expenses this fund (along with 3 others he's recommending) outperforms the S&P. C class shares are available with no front end load, and no back end load if i keep it for over a year.

How would a Boglehead interpret this information? Many thanks for your input - wrapping my head around this stuff.

Image
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by dbr »

The interpretation is that the mid-cap value asset class is not what is represented by the S&P 500 which holds 5% in mid cap value and 14% in midcap altogether. Your fund holds 23% in mid cap value (it is hardly a mid cap value fund at all) and 63% in mid cap. You can go here to see these things:

http://portfolio.morningstar.com/RtPort ... =0.7055475

Benchmarking against an irrelevant index that does not have the same expected risk and expected return is one of the oldest tricks in the book of fund salesman misinformation.
Savvy
Posts: 367
Joined: Sat May 05, 2012 3:09 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by Savvy »

Ask him to sign a piece of paper saying that this fund will outperform the S&P 500 in the future and that if is doesn't he will be financially liable. If he won't sign it, ask him why not.
User avatar
Bogle101
Posts: 468
Joined: Mon Oct 01, 2012 10:14 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by Bogle101 »

Obviously a mid cap fund will outeperform the S&P 500 over some time periods. He is not highlighting the extra risk that comes with smaller capitalization stocks. But other than that, he seems like a cool guy.
40% Extended Market | 40% S&P 500 | 10% REIT | 5% State Muni Bond | 5% Cash
Investing is boring
Posts: 237
Joined: Tue Apr 09, 2013 11:55 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by Investing is boring »

Bogle101 wrote:Obviously a mid cap fund will outeperform the S&P 500 over some time periods. He is not highlighting the extra risk that comes with smaller capitalization stocks. But other than that, he seems like a cool guy.
A cool guy making a nice commission on that outrageous 1.75% expense ratio, by shoving miss-information in your face by comparing mid-cap fund to an irrelevant index. Awesome. [Offensive remark removed by admin LadyGeek]
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Fund Advice from Advisor - S&P500 Performance

Post by Grt2bOutdoors »

I'd drop this guy like a hot potato for two reason 1 - Using the wrong benchmark to compare performance. That is like comparing a Maserati's performance to a Honda Accord. 2 - Insulting your intelligence - basically your financial advisor who should be performing a service for you is actually performing a disservice by trying to mislead you. Now, the two reasons why he's trying to sell you on the investment - 1) if he sells enough of it, he'll get on the good graces side of the JP Morgan fund wholesaler who will then provide him with the hottest NHL tickets out there today for the Rangers game and 2) his bank account is looking a little empty and he needs some money so he can book his vacation to Tahiti for him and his girlfriend.

Is he licensed? Report him to FINRA - they have a reporting tool online for providing a disservice. Drop a line to the CEO of BofA who this guy ultimately works for - ask the CEO why they are providing this disservice and demand some action. Squeaky wheels helps to get answers. Oh, and don't tell the FA you are doing it - just do it and then yank your business.
Last edited by Grt2bOutdoors on Fri May 10, 2013 2:47 pm, edited 2 times in total.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Fund Advice from Advisor - S&P500 Performance

Post by Grt2bOutdoors »

Investing is boring wrote:
Bogle101 wrote:Obviously a mid cap fund will outeperform the S&P 500 over some time periods. He is not highlighting the extra risk that comes with smaller capitalization stocks. But other than that, he seems like a cool guy.
A cool guy making a nice commission on that outrageous 1.75% expense ratio, by shoving miss-information in your face by comparing mid-cap fund to an irrelevant index. Awesome. [Offensive remark removed by admin LadyGeek]
How is a fee level of 1.75% - classified as "LOW"? That is outrageously HIGH!!!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Grt2bOutdoors
Posts: 25625
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Fund Advice from Advisor - S&P500 Performance

Post by Grt2bOutdoors »

dbr wrote:The interpretation is that the mid-cap value asset class is not what is represented by the S&P 500 which holds 5% in mid cap value and 14% in midcap altogether. Your fund holds 23% in mid cap value (it is hardly a mid cap value fund at all) and 63% in mid cap. You can go here to see these things:

http://portfolio.morningstar.com/RtPort ... =0.7055475

Benchmarking against an irrelevant index that does not have the same expected risk and expected return is one of the oldest tricks in the book of fund salesman misinformation.
The correct benchmark is VOE - MidCap Value ETF - YTD Return is 18.36% YTD return of the JP Morgan Fund is: 14.74%. Nice try.....you've been rejected Merrill Lynch. Have a nice day! :happy
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
User avatar
Blues
Posts: 2501
Joined: Wed Dec 10, 2008 10:58 am
Location: Blue Ridge Mtns

Re: Fund Advice from Advisor - S&P500 Performance

Post by Blues »

Don't walk, run! :oops:
User avatar
Random Musings
Posts: 6770
Joined: Thu Feb 22, 2007 3:24 pm
Location: Pennsylvania

Re: Fund Advice from Advisor - S&P500 Performance

Post by Random Musings »

Merrill Edge - who do you think is getting the "edge" with a 1.75% load?

Hopefully, the door will hit his arse on the way out. If not, please make sure it does for me.

As a Boglehead, I would fire him, then do your own reading and research to decide whether you want to be a DIY or utilize a low-cost ethical advisor.

Take your time (except for the firing part).

RM
I figure the odds be fifty-fifty I just might have something to say. FZ
User avatar
InvestorNewb
Posts: 1663
Joined: Mon Sep 03, 2012 11:27 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by InvestorNewb »

What a joke... comparing apples with oranges.

It's reasons like this why I don't bother with fund managers.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
User avatar
momar
Posts: 1359
Joined: Sun Nov 13, 2011 11:51 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by momar »

I would ask him about this chart:

The orange shows Vanguard's Mid Cap Index, the Blue is the JP Morgan Mid Cap Value C.

I chose the Mid Cap Index instead of the Mid Cap Value because the JP Morgan fund is barely a value fund at all.

Image
"Index funds have a place in your portfolio, but you'll never beat the index with them." - Words of wisdom from a Fidelity rep
User avatar
Blues
Posts: 2501
Joined: Wed Dec 10, 2008 10:58 am
Location: Blue Ridge Mtns

Re: Fund Advice from Advisor - S&P500 Performance

Post by Blues »

Image

"The tribe has spoken!"
Topic Author
jstar32
Posts: 12
Joined: Fri May 10, 2013 12:14 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by jstar32 »

Folks - I believe I've completely misrepresented what I meant to communicate, so let me set the record straight on my end...

He actually selected these funds stating they outperformed Vanguard Total Market Fund (VTSMX I believe) over 10 years - why I twisted that around and showed it vs. the S&P500 I can only assume is a rookie brainfart.

That said, it doesn't change the calculus at all, right? As far as risk-adjusted returns go, a VTSMX/VINIX is what a Boglehead will lean toward vs any of these higher-expense funds, correct?
User avatar
momar
Posts: 1359
Joined: Sun Nov 13, 2011 11:51 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by momar »

jstar32 wrote:Folks - I believe I've completely misrepresented what I meant to communicate, so let me set the record straight on my end...

He actually selected these funds stating they outperformed Vanguard Total Market Fund (VTSMX I believe) over 10 years - why I twisted that around and showed it vs. the S&P500 I can only assume is a rookie brainfart.

That said, it doesn't change the calculus at all, right? As far as risk-adjusted returns go, a VTSMX/VINIX is what a Boglehead will lean toward vs any of these higher-expense funds, correct?
No, it doesn't.

It is legitimate to own separate Mid and/or Small cap funds, many here tilt to them. But there is no reason to own ones that charge a fee like that; if you want to own a Mid Cap fund, own a Mid Cap 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
leonard
Posts: 5993
Joined: Wed Feb 21, 2007 10:56 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by leonard »

Why would we compare a Mid Cap Value fund against the S&P 500?
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
dickenjb
Posts: 2941
Joined: Tue Jan 05, 2010 12:11 pm
Location: Philadelphia PA

Re: Fund Advice from Advisor - S&P500 Performance

Post by dickenjb »

jstar32 wrote:May I ask, does this performance graph take into account annual expenses? My advisor says after expenses this fund (along with 3 others he's recommending) outperforms the S&P.
You got the tense of the verb wrong - it outperformed in the past. As others have pointed out, it is the wrong index. Anyone can pick a fund or sector that outperformed the broad market or LC blend in the past. No one can reliably pick sectors which will outperform in the future.
Topic Author
jstar32
Posts: 12
Joined: Fri May 10, 2013 12:14 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by jstar32 »

Thanks one and all. I'm pretty sure from here its the KISS method - the "3 Fund Portfolio", just a matter of selecting allocations.
User avatar
Blues
Posts: 2501
Joined: Wed Dec 10, 2008 10:58 am
Location: Blue Ridge Mtns

Re: Fund Advice from Advisor - S&P500 Performance

Post by Blues »

jstar32 wrote:Thanks one and all. I'm pretty sure from here its the KISS method - the "3 Fund Portfolio", just a matter of selecting allocations.
Winner! :beer
User avatar
SkierMom
Posts: 239
Joined: Thu Nov 29, 2012 7:53 pm
Location: Northern CAli

Re: Fund Advice from Advisor - S&P500 Performance

Post by SkierMom »

John...I like perusing the Boglehead board for "Advisor" questions every now and then, just for the expense ratio humor.

Thanks for posting! :sharebeer
pkcrafter
Posts: 15461
Joined: Sun Mar 04, 2007 11:19 am
Location: CA
Contact:

Re: Fund Advice from Advisor - S&P500 Performance

Post by pkcrafter »

Just so we cover everything that's wrong--
C class shares are available with no front end load, and no back end load if i keep it for over a year.
You, or he, makes this sound like a good deal, no front or back end load, BUT this advisor is giving you no deal. C shares are by far the worst because they carry an ongoing 1% load embedded in the expense ratio. An expense ratio of 1.75 all but guarantees poor performance over time.

Paul
Last edited by pkcrafter on Fri May 10, 2013 6:39 pm, edited 1 time in total.
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Call_Me_Op
Posts: 9881
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: Fund Advice from Advisor - S&P500 Performance

Post by Call_Me_Op »

Instead of listening to this or any advisor, I recommend that you educate yourself on investing.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
MN Finance
Posts: 1926
Joined: Sat Dec 22, 2012 9:46 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by MN Finance »

Just to clarify. There is good reason to potentially own funds of various asset classes. The reason is that those funds can have a positive impact on risk / return in a portfolio. Many of "those" asset classes indeed outperform the S&P, in fact the S&P is one of the lower performing classes of the market itself. If someone is making a statement that a mid cap fund out performed, one valid reason is because of the types of stocks. It's not because within that segment of the market, the fund in question has any particular advantage or knows how to pick the best stocks. So, building a portfolio of various classes is valid. Then it comes down to choosing which fund gives you the best exposure to that class. Clearly losing 1.75% per year to fees will eventually result in poor performance results when compared to the appropriate index. This is the underlying reason why people focus on choosing a low cost index fund itself.

I disagree entirely with spending your valuable time trying to report this behavior to any governing body. First, being held to a suitability standard is pretty low so there's nothing legally off here (though obviously morally questionable when comparing to the high standards self imposed by this group.) Second is that you have no case and won't win. If you decide not to continue with the advisor, just leave and say no thanks.
User avatar
Toons
Posts: 14467
Joined: Fri Nov 21, 2008 9:20 am
Location: Hills of Tennessee

Re: Fund Advice from Advisor - S&P500 Performance

Post by Toons »

Regarding 1.75% expense ratio and the corrosive effect it can have on the compounded return on YOUR money,plug some expense ratio numbers in the link below and it won't take long for you to realize how
much money is being siphoned off to the fund company slowly but surely over time :happy

http://www.calcxml.com/calculators/inv12?skn=#top
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Topic Author
jstar32
Posts: 12
Joined: Fri May 10, 2013 12:14 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by jstar32 »

Toons wrote:Regarding 1.75% expense ratio and the corrosive effect it can have on the compounded return on YOUR money,plug some expense ratio numbers in the link below and it won't take long for you to realize how
much money is being siphoned off to the fund company slowly but surely over time :happy

http://www.calcxml.com/calculators/inv12?skn=#top

That was one of the questions I had about the chart - it doesn't show the compounding negative effect of that expense ratio, correct?
Topic Author
jstar32
Posts: 12
Joined: Fri May 10, 2013 12:14 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by jstar32 »

pkcrafter wrote:Just so we cover everything that's wrong--
C class shares are available with no front end load, and no back end load if i keep it for over a year.
You, or he, makes this sound like a good deal, no front or back end load, BUT this advisor is giving you no deal. C shares are by far the worst because they carry an ongoing 1% load embedded in the expense ratio. An expense ratio of 1.75 all but guarantees poor performance over time.

Paul
Nice information, thanks Paul!
leonard
Posts: 5993
Joined: Wed Feb 21, 2007 10:56 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by leonard »

MN Finance wrote:Just to clarify. There is good reason to potentially own funds of various asset classes. The reason is that those funds can have a positive impact on risk / return in a portfolio. Many of "those" asset classes indeed outperform the S&P, in fact the S&P is one of the lower performing classes of the market itself. If someone is making a statement that a mid cap fund out performed, one valid reason is because of the types of stocks. It's not because within that segment of the market, the fund in question has any particular advantage or knows how to pick the best stocks. So, building a portfolio of various classes is valid. Then it comes down to choosing which fund gives you the best exposure to that class. Clearly losing 1.75% per year to fees will eventually result in poor performance results when compared to the appropriate index. This is the underlying reason why people focus on choosing a low cost index fund itself.

I disagree entirely with spending your valuable time trying to report this behavior to any governing body. First, being held to a suitability standard is pretty low so there's nothing legally off here (though obviously morally questionable when comparing to the high standards self imposed by this group.) Second is that you have no case and won't win. If you decide not to continue with the advisor, just leave and say no thanks.
There's a difference between slicing and dicing AND benchmarking against the wrong index. Is that what your saying?
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
2retire
Posts: 400
Joined: Wed Jun 13, 2012 9:00 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by 2retire »

jstar32 wrote: That was one of the questions I had about the chart - it doesn't show the compounding negative effect of that expense ratio, correct?
Incorrect. Morningstar charts show the performance after all fund fees (ER and trading costs).
Topic Author
jstar32
Posts: 12
Joined: Fri May 10, 2013 12:14 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by jstar32 »

MN Finance wrote:Just to clarify. There is good reason to potentially own funds of various asset classes. The reason is that those funds can have a positive impact on risk / return in a portfolio. Many of "those" asset classes indeed outperform the S&P, in fact the S&P is one of the lower performing classes of the market itself. If someone is making a statement that a mid cap fund out performed, one valid reason is because of the types of stocks. It's not because within that segment of the market, the fund in question has any particular advantage or knows how to pick the best stocks. So, building a portfolio of various classes is valid. Then it comes down to choosing which fund gives you the best exposure to that class. Clearly losing 1.75% per year to fees will eventually result in poor performance results when compared to the appropriate index. This is the underlying reason why people focus on choosing a low cost index fund itself.

I disagree entirely with spending your valuable time trying to report this behavior to any governing body. First, being held to a suitability standard is pretty low so there's nothing legally off here (though obviously morally questionable when comparing to the high standards self imposed by this group.) Second is that you have no case and won't win. If you decide not to continue with the advisor, just leave and say no thanks.
Many thanks for the thoughtful reply MN, especially about asset class diversification and risk/return - much appreciated!

May I ask your thoughts about the "3 fund portfolio" in regards to assessing risk/return vs. studying up on a potential portfolio of other varied index fund asset classes? I do have the book "The Intelligent Asset Allocator" - would this be heading in a right direction?
Last edited by jstar32 on Fri May 10, 2013 7:02 pm, edited 1 time in total.
Topic Author
jstar32
Posts: 12
Joined: Fri May 10, 2013 12:14 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by jstar32 »

2retire wrote:
jstar32 wrote: That was one of the questions I had about the chart - it doesn't show the compounding negative effect of that expense ratio, correct?
Incorrect. Morningstar charts show the performance after all fund fees (ER and trading costs).
Thanks much for the clarification.
lwfitzge
Posts: 311
Joined: Sun Jun 12, 2011 8:01 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by lwfitzge »

1) first, apples vs oranges , different asset classes, different benchmark indexes and different risk premia... nice comparison w that shell game, NOT.
2) even if he showed you a lg cap blend that beats SP500 ... past performance does predict future, ask him if he sees the future! If he does, ask him to guarantee it!
3) compare performance of like funds after removing sales load and expense ratios.....
User avatar
LadyGeek
Site Admin
Posts: 95691
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: Fund Advice from Advisor - S&P500 Performance

Post by LadyGeek »

jstar32 wrote:May I ask your thoughts about the "3 fund portfolio" in regards to assessing risk/return vs. studying up on a potential portfolio of other varied index fund asset classes? I do have the book "The Intelligent Asset Allocator" - would this be heading in a right direction?
That would be a step in the right direction. Take your time and do some reading, which should include the wiki: Getting Started

You have lots of choices, but the first thing you should pick is your Asset Allocation, which is the single most important decision you will make. Then, you choose the funds to make up your portfolio.

The Three-fund portfolio is one of many Lazy Portfolios.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
grabiner
Advisory Board
Posts: 35307
Joined: Tue Feb 20, 2007 10:58 pm
Location: Columbia, MD

Re: Fund Advice from Advisor - S&P500 Performance

Post by grabiner »

pkcrafter wrote:Just so we cover everything that's wrong--
C class shares are available with no front end load, and no back end load if i keep it for over a year.
You, or he, makes this sound like a good deal, no front or back end load, BUT this advisor is giving you no deal. C shares are by far the worst because they carry an ongoing 1% load embedded in the expense ratio. An expense ratio of 1.75 all but guarantees poor performance over time.
And this is an example of provably poor advice. How long does the advisor expect you to stay in this fund or other JPMorgan funds? If the answer is more than ten years (which is what you would want to do for a stock investment), then C shares are guaranteed to underperform A shares or B shares.

The first "advisor" (a free consultant from a bank) I talked to made the same mistake; he recommended Templeton Growth as a long-term investment based on its long-term performance record, and then recommended C shares, which I quickly realized were guaranteed to underperform A shares if held for over eight years. This blew his credibility because it was provably wrong, and led me to investigate on my own and find Vanguard International Growth instead (which was much better, although still wrong for tax reasons).
Wiki David Grabiner
User avatar
LadyGeek
Site Admin
Posts: 95691
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: Fund Advice from Advisor - S&P500 Performance

Post by LadyGeek »

Further clarification of share classes is in the wiki: Mutual fund

It references an article from the SEC: Invest Wisely: An Introduction to Mutual Funds, under "Classes of Funds":
Class C Shares — Class C shares might have a 12b-1 fee, other annual expenses, and either a front- or back-end sales load. But the front- or back-end load for Class C shares tends to be lower than for Class A or Class B shares, respectively. Unlike Class B shares, Class C shares generally do not convert to another class. Class C shares tend to have higher annual expenses than either Class A or Class B shares.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
EyeYield
Posts: 658
Joined: Tue Sep 18, 2012 6:43 pm
Location: Extremistan

Re: Fund Advice from Advisor - S&P500 Performance

Post by EyeYield »

A closer apples to apples comparison.

http://quote.morningstar.com/fund/chart ... %2C0%22%7D

I'd go with the .28 ER, a better yield and over all performance.

These full service guys are trying to make money for their shareholders (public companies), the house and themselves, with the investor getting what's left over.
The way it works is with incentives. The higher the expense ratio, the more liquidity the fund manager has to offer incentives. The brokers at Merrill get emails everyday from fund managers looking to increase their AUM and are willing to add to the brokers commission and the brokers house too. These guys will NEVER recommend an index fund, because there's no incentive to.

Now if you really like the guy and think he deserves a tip or a yacht upgrade, then by all means let him pick some funds for you. You'll feel a lot better for him if you do.
(I'm only half kidding, because I know people that would rather pay anything than have even a mild confrontation.)

EDIT: Actually Vanguard Mid Cap Value index ETF - VOE has an even lower ER, which is reflected in it's over all performance.
http://quote.morningstar.com/ETF/chart. ... 2279%22%7D
"The stock market is a giant distraction from the business of investing." - Jack Bogle
HongKonger
Posts: 1079
Joined: Tue Jun 21, 2011 10:35 am
Location: Deep in the Balkans

Re: Fund Advice from Advisor - S&P500 Performance

Post by HongKonger »

Blues wrote:Image

"The tribe has spoken!"

The best laugh I have had all week. Thank you.
Topic Author
jstar32
Posts: 12
Joined: Fri May 10, 2013 12:14 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by jstar32 »

EyeYield wrote: The way it works is with incentives. The higher the expense ratio, the more liquidity the fund manager has to offer incentives.
That make sense to me - many thanks...
Topic Author
jstar32
Posts: 12
Joined: Fri May 10, 2013 12:14 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by jstar32 »

Call_Me_Op wrote:Instead of listening to this or any advisor, I recommend that you educate yourself on investing.
I agree. That's why I came to this forum to post a question.
Topic Author
jstar32
Posts: 12
Joined: Fri May 10, 2013 12:14 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by jstar32 »

LadyGeek wrote:Further clarification of share classes is in the wiki: Mutual fund

It references an article from the SEC: Invest Wisely: An Introduction to Mutual Funds, under "Classes of Funds":
Class C Shares — Class C shares might have a 12b-1 fee, other annual expenses, and either a front- or back-end sales load. But the front- or back-end load for Class C shares tends to be lower than for Class A or Class B shares, respectively. Unlike Class B shares, Class C shares generally do not convert to another class. Class C shares tend to have higher annual expenses than either Class A or Class B shares.
Thank you.
Topic Author
jstar32
Posts: 12
Joined: Fri May 10, 2013 12:14 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by jstar32 »

LadyGeek wrote:
jstar32 wrote:May I ask your thoughts about the "3 fund portfolio" in regards to assessing risk/return vs. studying up on a potential portfolio of other varied index fund asset classes? I do have the book "The Intelligent Asset Allocator" - would this be heading in a right direction?
That would be a step in the right direction. Take your time and do some reading, which should include the wiki: Getting Started

You have lots of choices, but the first thing you should pick is your Asset Allocation, which is the single most important decision you will make. Then, you choose the funds to make up your portfolio.

The Three-fund portfolio is one of many Lazy Portfolios.
Very helpful once again - thank you!
User avatar
InvestorNewb
Posts: 1663
Joined: Mon Sep 03, 2012 11:27 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by InvestorNewb »

EyeYield wrote:These guys will NEVER recommend an index fund, because there's no incentive to.
I remember when I met with a fund manager at a different bank many months ago, he showed me a list of their funds. One was an index fund and he also discouraged it by saying that the problem with index funds is that there is "nobody there to pick out the bad apples from the bunch".

Their index fund also had an expense ratio of about 1% - I almost feel bad for the people that don't know any better.

Thankfully I came here and educated myself on the topic.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
User avatar
Bogle101
Posts: 468
Joined: Mon Oct 01, 2012 10:14 am

Re: Fund Advice from Advisor - S&P500 Performance

Post by Bogle101 »

Investing is boring wrote:
Bogle101 wrote:Obviously a mid cap fund will outeperform the S&P 500 over some time periods. He is not highlighting the extra risk that comes with smaller capitalization stocks. But other than that, he seems like a cool guy.
A cool guy making a nice commission on that outrageous 1.75% expense ratio, by shoving miss-information in your face by comparing mid-cap fund to an irrelevant index. Awesome. [Offensive remark removed by admin LadyGeek]
Hey, cool guys deserve that management fee!
40% Extended Market | 40% S&P 500 | 10% REIT | 5% State Muni Bond | 5% Cash
shersch
Posts: 29
Joined: Thu May 16, 2013 12:59 pm

Re: Fund Advice from Advisor - S&P500 Performance

Post by shersch »

One of my favorite broker tricks! It's hindsight bias at its best.

Something I like to do, also with Morningstar, is check the Fund Family [you'll see a little FF in red in the upper left of any mutual fund you look up]. Then plug in a Vanguard fund and do the same thing. This way, you're not cherry-picking, but capturing the total fund family's performance. You're not looking for the needle in the haystack -- you're looking for the haystack with the most needles.

This is what you get if you do that:

JP -- YTD 5.80% 3 Year 7.92% 5 Year 4.95%
VG -- YTD 8.26% 3 Year 10.32% 5 Year 5.66%

These numbers do include annual expense ratios, 12b-1 fees, and the like, but they do not include loads. Add in a hefty Class A admission price, and you're behind by that much more. Add in survivorship bias, which is almost certain to be worse for JP, and the picture gets uglier still.


Any one of us can go find funds that kicked the pants off of JCMVX. Should we invest in them? Not unless you think you're one of the lucky few. I don't know about you guys, but I guess I lack that confidence. What can I say?
Post Reply