High fee funds

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billo43
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High fee funds

Post by billo43 » Wed Oct 18, 2017 12:36 pm

I have some high fee funds that are doing well. Should I keep them or sell them and put them in a low fee index fund like Vanguard Total Stock index? :confused

I'm 61 years old.

alex_686
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Re: High fee funds

Post by alex_686 » Wed Oct 18, 2017 12:42 pm

What are you getting for your high fees? The answer is not past performance - the past is the past and does not indicate future performance. There are some strategies out there that I might be willing to pay for - mostly in bonds. PIMCO's Income Fund, junk bonds, etc. small cap EM, Long / Short, and other exotic strategies also make the list. However the hurdle for these funds to clear is pretty high. Unless you can come up with a strong reason why you should be holding high fee funds, go with the low fee ones.

Jack FFR1846
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Re: High fee funds

Post by Jack FFR1846 » Wed Oct 18, 2017 12:44 pm

What are the funds.

With all the brew ha ha of TDAmeritrade dumping Vanguard ETFs, I went through their list of no fee etfs and noted that one was over 7%! Not 0.7%....7%. That's just stupid.

Going forward, the only thing you can know at all is fees.
Bogle: Smart Beta is stupid

Lou354
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Re: High fee funds

Post by Lou354 » Wed Oct 18, 2017 2:15 pm

To give decent advice it would be helpful to know whether the funds are held in a taxable or tax-advantaged account. If in a taxable account, when will you need to use the money in these funds? Also your marginal tax rate at various points in time such as now, 5 years from now, and at the tume you'll be withdrawing this money for spending.

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Taylor Larimore
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Re: High fee funds

Post by Taylor Larimore » Wed Oct 18, 2017 2:25 pm

billo43 wrote:
Wed Oct 18, 2017 12:36 pm
I have some high fee funds that are doing well. Should I keep them or sell them and put them in a low fee index fund like Vanguard Total Stock index? :confused

I'm 61 years old.
Billo43:

Welcome to the Bogleheads Forum!

There is a lead article on today's Morningstar homepage about "high fee" funds. This is the link:

Four High Cost Fund Duds

Yes, "put them in a low fee index fund like Vanguard Total Stock Index."

Caveat: If the funds are in a taxable account with large capital gains, it may be better to hold them. Check with your accountant.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

KSActuary
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Re: High fee funds

Post by KSActuary » Wed Oct 18, 2017 3:15 pm

alex_686 wrote:
Wed Oct 18, 2017 12:42 pm
What are you getting for your high fees? The answer is not past performance - the past is the past and does not indicate future performance. There are some strategies out there that I might be willing to pay for - mostly in bonds. PIMCO's Income Fund, junk bonds, etc. small cap EM, Long / Short, and other exotic strategies also make the list. However the hurdle for these funds to clear is pretty high. Unless you can come up with a strong reason why you should be holding high fee funds, go with the low fee ones.
If the fund has shown outperformance over a long period of time, why would you not keep it? While few and far between, there are some funds that have done quite well.

alex_686
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Re: High fee funds

Post by alex_686 » Wed Oct 18, 2017 3:26 pm

KSActuary wrote:
Wed Oct 18, 2017 3:15 pm
If the fund has shown outperformance over a long period of time, why would you not keep it? While few and far between, there are some funds that have done quite well.
Because past performance is not predictive of future performance. Well, not quite true. Funds that have underperformed tend to continue to underperform. Funds with long track records of outperformace are just as likely to underperform in a given year as any other fund. We can more or less rule out history.

There are characteristics that identify superior funds. Quality of management team and strategy are 2 examples. However it is hard to act on these as the signaling tends to be weak.

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bottlecap
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Re: High fee funds

Post by bottlecap » Wed Oct 18, 2017 4:03 pm

First order of business: How do you know they are doing well? Is it appropriate to compare these funds to an index? If not, your funds may not be doing so well.

If it is an appropriate comparison, then from a theoretical standpoint, you should sell them and buy comparable index funds. Just because those high fee funds have done well in the past does not mean they will continue to do so.

That said it is possible, though statistically improbably, that they will continue to do well.

Final thought: Is this in a taxable account? If so, selling the funds that have done well may incur tax consequences that may effect the your decision whether to make the switch.

Good luck,

JT

JBTX
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Re: High fee funds

Post by JBTX » Wed Oct 18, 2017 4:06 pm

Would help to know what funds at and how high the fees are. In most circumstances you are better off with index funds but there are a few funds that seem to keep up with the indexes in spite of fees. Whether they continue to do so remains to be seen. It really depends on what those funds are and what you are trying to accomplish with those funds.

Over the years I have had quite a few active funds. Over time I eliminated most of the higher fee funds and moving towards index funds. I still have a few moderate and low fee active funds.

If these are in taxable accounts I’d want to understand the income tax impact before immediately liquidating.

KSActuary
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Re: High fee funds

Post by KSActuary » Thu Oct 19, 2017 9:50 pm

alex_686 wrote:
Wed Oct 18, 2017 3:26 pm
KSActuary wrote:
Wed Oct 18, 2017 3:15 pm
If the fund has shown outperformance over a long period of time, why would you not keep it? While few and far between, there are some funds that have done quite well.
Because past performance is not predictive of future performance. Well, not quite true. Funds that have underperformed tend to continue to underperform. Funds with long track records of outperformace are just as likely to underperform in a given year as any other fund. We can more or less rule out history.

There are characteristics that identify superior funds. Quality of management team and strategy are 2 examples. However it is hard to act on these as the signaling tends to be weak.
So how long of a track record would you require before you felt that the past performance was some indication of future performance?

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whodidntante
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Re: High fee funds

Post by whodidntante » Thu Oct 19, 2017 9:55 pm

I have two AQR funds that aren't the cheapest. I bought them for the alternative sources of return. Some here wouldn't touch them with a 3 meter pole.

I wouldn't buy a "stock picking" fund that was expensive unless it was my only option (like in a 401k).

Johm221122
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Re: High fee funds

Post by Johm221122 » Fri Oct 20, 2017 5:22 am

KSActuary wrote

So how long of a track record would you require before you felt that the past performance was some indication of future performance?
The longer the period,the less chance of same manager and the more chance of under performance

https://www.google.com/amp/s/www.cnbc.c ... years.html

Bill Miller beat index 15 straight years,then in next 3 his long term average was below index
https://www.google.com/amp/amp.timeinc. ... source=dam

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ruralavalon
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Re: High fee funds

Post by ruralavalon » Fri Oct 20, 2017 9:14 am

Welcome to the forum :)
billo43 wrote:
Wed Oct 18, 2017 12:36 pm
I have some high fee funds that are doing well. Should I keep them or sell them and put them in a low fee index fund like Vanguard Total Stock index? :confused

I'm 61 years old.
What funds are you referring to and what are their expense ratios? Please give fund names, tickers and expense ratios. What type of account are these funds in?

You can simply add this to your original post using the edit button.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

billo43
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Re: High fee funds

Post by billo43 » Thu Apr 12, 2018 9:08 pm

Sorry, had to deal with some family issues.

The fund is: Gabelli Asset Fund. Expenses 1.36% Large Cap No Load Non-IRA

Do I sell all or part of it?

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Taylor Larimore
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Re: High fee funds

Post by Taylor Larimore » Thu Apr 12, 2018 10:11 pm

billo43 wrote:
Wed Oct 18, 2017 12:36 pm
I have some high fee funds that are doing well. Should I keep them or sell them and put them in a low fee index fund like Vanguard Total Stock index? :confused

I'm 61 years old.
billo43:

You mentioned owning Gabelli Asset Fund. According to Morningstar, your Gabelli Asset Fund (GABIX) returns have been below average for the past 1-year, 3-years and 10-years. With an expense ratio over 1%, your low returns are likely to continue.

You state that your funds are in a taxable account. Selling this fund could result in a capital-gain tax. Check with your accountant before selling. It may be better to hold the fund but stop all contributions and dividend reinvestments.

I suggest new contributions go into tax-efficient total market index funds.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

pkcrafter
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Re: High fee funds

Post by pkcrafter » Thu Apr 12, 2018 11:54 pm

billo, there are several versions of that fund, we need the ticker symbol. Taylor has provided info on the investor class, but is that the fund you have? Some versions have even lower returns because of higher fees.

Paul
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.

billo43
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Re: High fee funds

Post by billo43 » Mon Apr 16, 2018 4:09 pm

The symbol is: GABAX. Accountant ? I don't have one. Anyway I can figure it out by self? :)

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Taylor Larimore
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Re: High fee funds

Post by Taylor Larimore » Mon Apr 16, 2018 7:10 pm

Billo43:

I hate to tell you, but according to Morningstar, each $10,000 invested in "GABAX" has a 10-year cost of $1,035.

Compare this with the 10-year cost for Total Stock Market (VTIAX) of $192.
Act as if every broker, insurance salesman, mutual fund salesperson and financial advisor you encounter is a hardened criminal, and stick to low-cost index funds, and you'll do just fine. --Bill Bernstein, author of "If You Can."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

pkcrafter
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Re: High fee funds

Post by pkcrafter » Mon Apr 16, 2018 11:13 pm

billo, here's the performance of GABAX on Morningstar. This fund is also very tax-inefficient, so shouldn't be in a taxable account.

http://performance.morningstar.com/fund ... ture=en-US


Paul
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.

billo43
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Re: High fee funds

Post by billo43 » Tue Apr 17, 2018 9:59 pm

Thanks for the info. I do have Total Stock Index.

billo43
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Re: High fee funds

Post by billo43 » Wed May 09, 2018 12:13 pm

Do you think I should sell all the fund or 1/3 or 1/2 at a time?

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ruralavalon
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Re: High fee funds

Post by ruralavalon » Wed May 09, 2018 3:07 pm

billo43 wrote:
Wed May 09, 2018 12:13 pm
Do you think I should sell all the fund or 1/3 or 1/2 at a time?
Garbell Asset Fund Class AAA (GABAX) has a very high expense ratio of 1.36%. I see no reason to pay that high expense ratio any longer. Is this in a tax-advantaged account like a 401k? I suggest making the change all at once.
Last edited by ruralavalon on Wed May 09, 2018 3:45 pm, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Ged
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Re: High fee funds

Post by Ged » Wed May 09, 2018 3:16 pm

KSActuary wrote:
Thu Oct 19, 2017 9:50 pm

So how long of a track record would you require before you felt that the past performance was some indication of future performance?
You may get heads seven times in a row flipping a coin. That doesn't change the fact that the 8th toss is still 50-50.

https://www.economist.com/news/finance- ... mance-fund

KSActuary
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Re: High fee funds

Post by KSActuary » Wed May 09, 2018 5:29 pm

How about heads 20 times?

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Taylor Larimore
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Re: High fee funds

Post by Taylor Larimore » Wed May 09, 2018 6:12 pm

KSActuary wrote:
Wed May 09, 2018 5:29 pm
How about heads 20 times?
KSActuary:

The fund with the longest history of beating the S&P 500 Index Fund (15 years) is Legg Mason Value Trust (LMVTX).

According to Morningstar, LMVTX is now in the BOTTOM 1% of all funds in its category (Large Blend) for 15-year returns.
Jack Bogle: The biggest mistake investors make is looking backward at performance and thinking it’ll recur in the future.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

billo43
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Re: High fee funds

Post by billo43 » Wed May 09, 2018 8:47 pm

Thank you...it is not a 401K.

KSActuary
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Re: High fee funds

Post by KSActuary » Wed May 09, 2018 9:43 pm

PRWCX has beaten the S&P 500 index for more than 20 years.

The PrimeCap Odyssey funds are also putting up an impressive record so far.

The majority of funds do not beat their index just as pro sports teams fair poorly after expansion - too many cooks in the kitchen with ulterior motives.

Nothing is absolute.

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