Jim Lowell of Fidelity Investor & Dan Weiner on NBR

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Jim Lowell of Fidelity Investor & Dan Weiner on NBR

Postby davidkw » Wed Feb 17, 2010 7:50 am

NBR transcript

WIENER: Well, because the index funds have really under performed some of the great actively managed funds at Vanguard. They've got great active funds that are low cost, just like their index funds, but they out perform. I can give you a couple of examples. Their dividend growth fund run by Don Kilbright (ph), four years he's been running the fund. The fund is up about 8 or 9 percent. Every other growth and income fund at Vanguard including the biggest index funds are down 8 or 9 percent over the same period.
Is this really true???

Over the last 10 years, the fund or the index that tracks health care stocks is up about 140 percent. The fund that Ed Owens runs is up 140 percent. I mean and that's an index against a managed fund, you can't buy an index. You've got to have an operating expense in there. He just completely blows most people away, because he picks great stocks.



LOWELL: No question it's changed strategy for Fidelity. They just came out with a very interesting deal with Blackrock, offering 25 core Ishares funds commission free to investors. That's not just a shot across Vanguard's bow. That's a shot right through the center of the hull. And the reality is Fidelity is making a big bid for market share in the ETF space. That's said, Dan's exactly right.


Schwab with their low expense index funds and ETFs seem to be more of a challenger to Vanguard than Fidelity with the iShares ETFs
David

From Jack Brennan's "Straight Talk on Investing", page 23 "Living below your means is the ultimate financial strategy"
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Postby SpringMan » Wed Feb 17, 2010 8:40 am

Dan Wiener does seem a little loose with his performance numbers. What does he mean you can't buy a health care index? Vanguard has one, VHCIX, and available as an ETF VHT.
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Postby atomicrc11 » Wed Feb 17, 2010 12:30 pm

I think Mr. Wieners' point is that you cannot buy every stock in the index in an index fund. The performance of the index is that of all stocks contained in the index and most index funds do not hold 100% of the index. There usually is some play upwards but more likely downwards in performance because of the expenses of running the index fund.

That said, an index fund could still beat the index because it does not hold 100% of the index if it leaves out some losers. Mr. Wiener is trying to advocate for managed funds, which is what he believes can beat the index the fund tracks. He is right and they can beat the index, but not always.
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Re: Jim Lowell of Fidelity Investor & Dan Weiner on NBR

Postby Wagnerjb » Wed Feb 17, 2010 2:59 pm

davidkw wrote:
WIENER: Well, because the index funds have really under performed some of the great actively managed funds at Vanguard. They've got great active funds that are low cost, just like their index funds, but they out perform. I can give you a couple of examples. Their dividend growth fund run by Don Kilbright (ph), four years he's been running the fund. The fund is up about 8 or 9 percent. Every other growth and income fund at Vanguard including the biggest index funds are down 8 or 9 percent over the same period.
Is this really true???



Depends on what Wiener is actually saying. Look at his words carefully. He says, "some of the great actively managed funds" have outperformed their index benchmark. Sure. But we didn't know they were "great" until after they outperformed.

If you track the Vanguard active stock funds against their benchmark, you will see something close to 50% underperforming...depending on the time frame. Their low cost makes them competitive, but they certainly don't have a compelling record of outperformance.

Over the last 10 years, the fund or the index that tracks health care stocks is up about 140 percent. The fund that Ed Owens runs is up 140 percent. I mean and that's an index against a managed fund, you can't buy an index. You've got to have an operating expense in there. He just completely blows most people away, because he picks great stocks.


This is a diversion, besides being spurious benchmarking (VGHCX has a sizable foreign component, so the comparison isn't valid). More importantly, Wiener is glossing over his total failure to point investors to the more profitable sector funds. Vanguard has 4 sector funds, while the remainder of their mutual funds are much more diversified. Wiener has consistently recommended VGHCX, but over the past 10 years, the other three sector funds have far surpassed VGHCX. Precious Metals has returned an annual average of 17.85%, Energy has returned 16.08% and REIT has returned 9.74%. Health Care is dead last with 8.82%.

They guy is trying to sell his newsletter, and I don't blame him for selectively quoting facts. That's his job. But intelligent investors don't have to fall for his spiel.

Best wishes.
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Postby sperry8 » Wed Feb 17, 2010 8:01 pm

I used Weiner for a while. He actually picks the best actively managed funds and avoids the worst ones. He even runs his 'active' portfolio against an index of Vangaurd funds for comparative purposes. It helped me a lot when I was a newbie.

However, he times the market (or attempts to) He pulls you in an and out of active funds throughout the year - and many times it's at the absolute worst time. He pulled us out of Emerging Markets in Dec 08. You know what happened in 09. The examples go on and on. Since I don't market time - after I set up my portfolio allocation (using some of the active Vanguard funds suggested by Weiner), I just let them be and never made changes. As I followed against Weiner over the years, my portfolio outperformed, so I dropped the expense of his newsletter.

Actively managed funds he recommended that I remain in are Health Care, PRIMECAP, Cap Oppty, and Global Equity. He also was the first person to suggest that I enter VWO, although luckily I was soured on him when he recommended his sell position and never sold.
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