Help Me Break My Love Affair With Fidelity Low Priced Stock

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hushpuppy
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by hushpuppy »

delete
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by Traveler »

OP, I've owned FLPSX for years too and can't seem to let it go as I move my portfolio into one of there-four index funds. It's done me well over the years and I plan to keep it a while.
MrPotatoHead
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by MrPotatoHead »

Interesting. In this forum people believe in diversifying not only between stocks and bonds, but splitting equities with international and some add in REITs, precious metals and some add in other commodities, some add in lending etc. People also believe in diversifying tax status of assets as a hedge on future legislation etc.

Given that it seems logical to me that you might want to diversify investment approach too, mixing passive with active management as long as you have an eye on expenses. As more and more investment assets are passively manged no one really knows the impact it will have. It seems to me, a bit of diversification toward a solid manged strategy may be a prudent move.

I did move out of FIDO's low priced stock fund, but I moved those assets into FIDO's Growth Company (FDGRX) with a .77% ER (I already had a position so I was allowed to add to it).
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by avalpert »

MrPotatoHead wrote: Sun Nov 05, 2017 8:58 pm Given that it seems logical to me that you might want to diversify investment approach too, mixing passive with active management as long as you have an eye on expenses. As more and more investment assets are passively manged no one really knows the impact it will have. It seems to me, a bit of diversification toward a solid manged strategy may be a prudent move.
I don't see how that's logical at all - if anything you could see why diversifying across different types of active approaches might make sense, of course that ultimately leads you to the market portfolio and an an index fund...

'Passive management' and 'active management' aren't just two opinions with no reason to expect them to have different results. Active managers are an uncompensated, non-diversified risk to take on - you might hit it big just like you might with a single stock or you might significantly underperform as with a single stock but your expected outcome is the market return (for the systematic risk the portfolio takes on) with higher volatility than the market portfolio.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by MrPotatoHead »

avalpert wrote: Sun Nov 05, 2017 9:35 pm
MrPotatoHead wrote: Sun Nov 05, 2017 8:58 pm Given that it seems logical to me that you might want to diversify investment approach too, mixing passive with active management as long as you have an eye on expenses. As more and more investment assets are passively manged no one really knows the impact it will have. It seems to me, a bit of diversification toward a solid manged strategy may be a prudent move.
I don't see how that's logical at all - if anything you could see why diversifying across different types of active approaches might make sense, of course that ultimately leads you to the market portfolio and an an index fund...

'Passive management' and 'active management' aren't just two opinions with no reason to expect them to have different results. Active managers are an uncompensated, non-diversified risk to take on - you might hit it big just like you might with a single stock or you might significantly underperform as with a single stock but your expected outcome is the market return (for the systematic risk the portfolio takes on) with higher volatility than the market portfolio.
What you say may be true then again it may not. I'l still contend we have not seen the likes of the large amount of money funneling into passive investment approaches.

I suspect you also are excluding from your universe of active management, investments that fall under Rule 506 exemptions.

I have a couple of nice selections, among them some private section 8 housing developments and a couple of PE franchise operations.

I tend to think when people get enough assets, looking for accredited investments opportunities may have some merit. Then again, it simply depends on what you are trying to accomplish and why.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by avalpert »

MrPotatoHead wrote: Sun Nov 05, 2017 11:21 pm
avalpert wrote: Sun Nov 05, 2017 9:35 pm
MrPotatoHead wrote: Sun Nov 05, 2017 8:58 pm Given that it seems logical to me that you might want to diversify investment approach too, mixing passive with active management as long as you have an eye on expenses. As more and more investment assets are passively manged no one really knows the impact it will have. It seems to me, a bit of diversification toward a solid manged strategy may be a prudent move.
I don't see how that's logical at all - if anything you could see why diversifying across different types of active approaches might make sense, of course that ultimately leads you to the market portfolio and an an index fund...

'Passive management' and 'active management' aren't just two opinions with no reason to expect them to have different results. Active managers are an uncompensated, non-diversified risk to take on - you might hit it big just like you might with a single stock or you might significantly underperform as with a single stock but your expected outcome is the market return (for the systematic risk the portfolio takes on) with higher volatility than the market portfolio.
What you say may be true then again it may not. I'l still contend we have not seen the likes of the large amount of money funneling into passive investment approaches.
I have yet to hear a sensible explanation for why that should impact the ability of individuals to consistently do better than the crowd (and I'm not interested in hypothetical what if everyone indexed nonsense).
I suspect you also are excluding from your universe of active management, investments that fall under Rule 506 exemptions.

I have a couple of nice selections, among them some private section 8 housing developments and a couple of PE franchise operations.

I tend to think when people get enough assets, looking for accredited investments opportunities may have some merit. Then again, it simply depends on what you are trying to accomplish and why.
I'm not excluding anything. I too have some investments that aren't available to the public - I do them because I believe in them and I can afford to, I don't do them because I believe I can pick which startups are going to happen to do better than general public markets and which will go up in flames. I haven't seen any evidence to suggest accredited investors do a better job at picking among those investment opportunity than the premium the market gets for public equity - do you have any?
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by siamond »

hushpuppy wrote: Sun Nov 05, 2017 6:08 pmSo, OP (Small Law Survivor), just curious... What did you decide and what input, if any, influenced your decision?
I am curious too. And it would be good if this thread could come back to its original topic... :?
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by Small Law Survivor »

WildBill wrote: Sat Nov 04, 2017 9:19 pm Index funds have served me well for over 30 years, but what was once a slightly idiosyncratic investment strategy has become the conventional wisdom, with enormous shifts of funds into indexes. That makes me somewhat uneasy, as my experience is that the conventional wisdom usually is not so wise.
I'm inclined to agree with this. This is one factor I've considered when debating whether to sell Low Priced Stock in favor of an index.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by heartwood »

There's a interview with Tillinghast in today's (Nov 6) WSJ.

For those with access https://www.wsj.com/articles/veteran-of ... 1509937740

For those using the pdf workaround its on page R8 (page number corrected, thanks obafgkm below)
Last edited by heartwood on Mon Nov 06, 2017 1:00 pm, edited 1 time in total.
avalpert
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by avalpert »

Small Law Survivor wrote: Mon Nov 06, 2017 9:02 am
WildBill wrote: Sat Nov 04, 2017 9:19 pm Index funds have served me well for over 30 years, but what was once a slightly idiosyncratic investment strategy has become the conventional wisdom, with enormous shifts of funds into indexes. That makes me somewhat uneasy, as my experience is that the conventional wisdom usually is not so wise.
I'm inclined to agree with this. This is one factor I've considered when debating whether to sell Low Priced Stock in favor of an index.
The market reflects conventional wisdom, betting against the market has not been a productive approach - therefore stopping to do something just because it gains favor with 'conventional wisdom' is unwarranted.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by WildBill »

avalpert wrote: Mon Nov 06, 2017 9:25 am
Small Law Survivor wrote: Mon Nov 06, 2017 9:02 am
WildBill wrote: Sat Nov 04, 2017 9:19 pm Index funds have served me well for over 30 years, but what was once a slightly idiosyncratic investment strategy has become the conventional wisdom, with enormous shifts of funds into indexes. That makes me somewhat uneasy, as my experience is that the conventional wisdom usually is not so wise.
I'm inclined to agree with this. This is one factor I've considered when debating whether to sell Low Priced Stock in favor of an index.
The market reflects conventional wisdom, betting against the market has not been a productive approach - therefore stopping to do something just because it gains favor with 'conventional wisdom' is unwarranted.
Howdy

I guess I just lack the confidence that you seem to have. I am concerned that the massive shift into indexes may have consequences that are not obvious or currently understood and that will be damaging to indexed returns.

I spent too many years in the energy business and in sketchy places where I was constantly surprised by paradigm shifts and unpredictable changes. I have very little confidence in my ability to predict events, and no confidence at all in assuming that what has worked in the past will continue to work in the future.

A carefully considered allocation to active management seems a prudent hedge against uncertainty. I view it as another form of insurance.

Good luck to all

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by obafgkm »

heartwood wrote: Mon Nov 06, 2017 9:18 am There's a interview with Tillinghast in today's (Nov 6) WSJ.

For those with access https://www.wsj.com/articles/veteran-of ... 1509937740

For those using the pdf workaround its on page R6
Page R8, actually.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by avalpert »

WildBill wrote: Mon Nov 06, 2017 10:04 am
avalpert wrote: Mon Nov 06, 2017 9:25 am
Small Law Survivor wrote: Mon Nov 06, 2017 9:02 am
WildBill wrote: Sat Nov 04, 2017 9:19 pm Index funds have served me well for over 30 years, but what was once a slightly idiosyncratic investment strategy has become the conventional wisdom, with enormous shifts of funds into indexes. That makes me somewhat uneasy, as my experience is that the conventional wisdom usually is not so wise.
I'm inclined to agree with this. This is one factor I've considered when debating whether to sell Low Priced Stock in favor of an index.
The market reflects conventional wisdom, betting against the market has not been a productive approach - therefore stopping to do something just because it gains favor with 'conventional wisdom' is unwarranted.
Howdy

I guess I just lack the confidence that you seem to have. I am concerned that the massive shift into indexes may have consequences that are not obvious or currently understood and that will be damaging to indexed returns.
It's not about confidence, it's about logic. Plenty of things have unintended and unforseen consequences and I would never rule out the possibility that shifts in the investment world could impact the future in strange ways. But when it comes to investing using index funds the argument are completely hollow - they seem to rest on a gross exaggeration of what is different.
A carefully considered allocation to active management seems a prudent hedge against uncertainty. I view it as another form of insurance.
You will have to explain what a 'considered allocation to active management' means - in fact you'll have to explain specifically in what ways you think the operations of an active fund differ from the operations of a an index fund such that it will insure you against some unforseen change in the investing landscape.

Can you describe any rationale that doesn't boil down to 'active managers will be able to get out before things go bad in the market' - a proposition that has been shown to be false time and time again? Is there any world where the weighted active dollar can outperform the weighted passive dollar, regardless of how the overall investment return environment changes? And if there isn't such a world, what is your careful consideration that will identify the active manager who will be on the plus side versus the active manager on the negative side?
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by hushpuppy »

delete
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by dcabler »

Similar situation here with FLPSX. The heyday was before the mid 2000's. After that, it has closely tracked a midcap blend and/or value index. My thoughts are that it's been converging on those indexes for a while - and Tillinghast isn't getting any younger. So....

- In my deferred accounts I have switched to FSCKX with some IJJ and a tiny bit of EM.
- In my taxable accounts, I don't want a huge capital gains hit for selling FLPSX. So, new purchases are following the FSCKX/IJJ/EM combo and I've directed FLPSX cap gains/dividend distributions accordingly to try and slowly bring down the amount of FLPSX in my account, but I doubt it will ever go to zero.
Last edited by dcabler on Mon Nov 06, 2017 1:57 pm, edited 1 time in total.
avalpert
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by avalpert »

hushpuppy wrote: Mon Nov 06, 2017 1:28 pm
Is there any world where the weighted active dollar can outperform the weighted passive dollar, regardless of how the overall investment return environment changes?
The weighted active dollar premise you use is mathematically irrefutable. However, I believe there are active managers that are more capable of selecting businesses that have superior prospects.
So basically you believe that there are managers who consistently outperform the market (and of course the corollary there are those that don't - you have to wonder how they stay employed) and you believe you can identify those manager ahead of time. I would challenge that if this is really the case you should be in the business of picking managers to manage other people's money and taking your rake off this skill of yours - but that is an argument for another time.

For our purposes, this is all well and good, but it wouldn't be affected by increasing dollars being invested via index funds. It would have been true before and true in the future and in fact would argue against you using indexes in any environment.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by WildBill »

avalpert wrote: Mon Nov 06, 2017 10:42 am
WildBill wrote: Mon Nov 06, 2017 10:04 am
avalpert wrote: Mon Nov 06, 2017 9:25 am
Small Law Survivor wrote: Mon Nov 06, 2017 9:02 am
WildBill wrote: Sat Nov 04, 2017 9:19 pm Index funds have served me well for over 30 years, but what was once a slightly idiosyncratic investment strategy has become the conventional wisdom, with enormous shifts of funds into indexes. That makes me somewhat uneasy, as my experience is that the conventional wisdom usually is not so wise.
I'm inclined to agree with this. This is one factor I've considered when debating whether to sell Low Priced Stock in favor of an index.
The market reflects conventional wisdom, betting against the market has not been a productive approach - therefore stopping to do something just because it gains favor with 'conventional wisdom' is unwarranted.
Howdy

I guess I just lack the confidence that you seem to have. I am concerned that the massive shift into indexes may have consequences that are not obvious or currently understood and that will be damaging to indexed returns.
It's not about confidence, it's about logic. Plenty of things have unintended and unforseen consequences and I would never rule out the possibility that shifts in the investment world could impact the future in strange ways. But when it comes to investing using index funds the argument are completely hollow - they seem to rest on a gross exaggeration of what is different.

I have never found that logic helps much in dealing with uncertainty. If there are things that you do not understand and cannot predict, how does logic help? It is only applicable to what you know, not what you don’t know. You are better off with diversification and a strong balance sheet.

If you say the arguments are hollow, that is fine with me. I have no idea what arguments you are talking about though, as I certainly haven’t made any. You may have misunderstood me. I freely admit to being puzzled about the consequences of the massive shift of funds into indexing, if any. I am also skeptical of any received wisdom, and the recent shift in prevailing opinions to the undoubted superiority of indexing makes me uneasy.



A carefully considered allocation to active management seems a prudent hedge against uncertainty. I view it as another form of insurance.
You will have to explain what a 'considered allocation to active management' means - in fact you'll have to explain specifically in what ways you think the operations of an active fund differ from the operations of a an index fund such that it will insure you against some unforseen change in the investing landscape.

Can you describe any rationale that doesn't boil down to 'active managers will be able to get out before things go bad in the market' - a proposition that has been shown to be false time and time again? Is there any world where the weighted active dollar can outperform the weighted passive dollar, regardless of how the overall investment return environment changes? And if there isn't such a world, what is your careful consideration that will identify the active manager who will be on the plus side versus the active manager on the negative side?
Plenty of good questions, some relevant to the discussion. As a first pass I would chose an active manager with a strong track record, a value bias and a relatively low ER, at least an ER that is consistent with past performance. I would consider the ER an insurance premium for diversification. In fact, that is what I have been doing with a portion of my portfolio, along with selecting individual securities based on value criteria.

YMMV

Good luck to all

W B
Last edited by WildBill on Mon Nov 06, 2017 4:03 pm, edited 1 time in total.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by hushpuppy »

delete
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avalpert
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by avalpert »

WildBill wrote: Mon Nov 06, 2017 1:57 pm Plenty of good questions, some relevant to the discussion. As a first pass I would chose an active manager with a strong track record, a value bias and a relatively low ER, at least an ER that is consistent with past performance. I would consider the ER an insurance premium for diversification.
But what exactly are you paying to diversify from - what are you insuring against? Why pay a manager when you can get a value bias through cheaper index funds?
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by avalpert »

hushpuppy wrote: Mon Nov 06, 2017 2:12 pm
avalpert wrote: Mon Nov 06, 2017 1:56 pm So basically you believe that there are managers who consistently outperform the market (and of course the corollary there are those that don't - you have to wonder how they stay employed) and you believe you can identify those manager ahead of time. I would challenge that if this is really the case you should be in the business of picking managers to manage other people's money and taking your rake off this skill of yours - but that is an argument for another time.
There are times when any fund will not consistently outperform... obviously. I have given two specific cases, where I have picked managers that have outperformed for the period of 2000 to now. I stated that I was not presumptuous enough to choose for others. However, you seem to be reading comprehension challenged. More likely you are just one of those people that will always be correct. Whatever floats your boat.

hushpuppy
Well you did give me two specific cases - how many other funds did you invest in over that time and how did they perform? I'm not always correct, but when it comes to the basic premises of the boglehead approach I am usually standing on top of strong ground (built by the work of others). Many people think they can pick winning managers just like many think they can pick winning stocks - most of the time there actual performance history doesn't back that up.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by Small Law Survivor »

This thread has me thinking, but I haven't made any decisions.

Most likely I'll stand pat with this fund, and perhaps sell it down a bit, but at this point I don't know.

Small Law Survivor.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by scooter »

I have owned it forever and it has been a winner forever and is only one of a few non index funds I own.

If it is not broken leave it alone.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by bestplans »

OP,

If it makes you feel any better I too am a hopeless romantic and held onto 3 funds for a very long time (before I simplified) that were considered perennial "all weather" types by Money, Kiplinger, and a bunch of other publications at the time (late 80's). They were Nicholas Fund, Mutual Shares (the old Michael Price fund) and Twentieth Century Select. At least they didn't carry a load. Love is blind.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by F150HD »

Small Law Survivor wrote: Thu Nov 02, 2017 2:07 pm One of them was Fidelity Low Priced Stock (FLPSX). (drum roll)

FLPSX: Fidelity fund manager: Investing successfully is about ‘minimizing regrets’

_
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by MrPotatoHead »

avalpert wrote: Sun Nov 05, 2017 11:45 pm
I'm not excluding anything. I too have some investments that aren't available to the public - I do them because I believe in them and I can afford to, I don't do them because I believe I can pick which startups are going to happen to do better than general public markets and which will go up in flames. I haven't seen any evidence to suggest accredited investors do a better job at picking among those investment opportunity than the premium the market gets for public equity - do you have any?
The world of private placements is vast. I do not need to be able to divine anything about start-ups., in fact all the private placements I am involved with are long established on-going concerns. Most of the private placements I am involved in gain their appeal through legislative or contractual stipulations that more or less guarantee an attractive level of steady performance.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by 3funder »

goingup wrote: Thu Nov 02, 2017 4:56 pm I would keep it, but I'm rather loyal to people, products, and institutions that I feel have done right by me. You own an investment that has outperformed since the early 90's. That's amazing. It's proven it's worth and shows no signs of breaking faith. Next decision? What's for dinner?
I'm going to play devil's advocate here. My uncle told me about this fund a few years ago, as he has invested in it for a few decades. Since inception (December 1989), Joel Tillinghast has done a fantastic job. That said, there are a few things to consider going forward:

1) As AUM has increased (quite a lot, by the way), the degree to which he has outperformed the market has decreased. The past 10 year period, for example, hasn't been particularly impressive. In the interest of fairness, year to date, he has done quite well.

2) If I'm not mistaken, he maintains positions in something like 900 publicly traded companies. That's a lot to keep tabs on.

So...

Hold? Maybe. Sell a small amount? Prudent. Invest new money into the fund? Unwise, as Mr. Tillinghast's job is much more difficult than it used to be.* Peter Lynch's AUM exploded, and he got tired. Nothing lasts forever.

*If you decide to invest new money, the fund's active share is 95%, so I suppose that could be a value-added.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by MTZ »

sorry to bump an old thread but has anyone else noticed FLPKX seems to be performing poorly this year? I'm thinking of getting out and switching to FSEVX but can't really find much info about why it suddenly seems to be underperforming (at least AFAICT).

TIA
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by FinIndyGal »

Small Law Survivor wrote: Mon Nov 06, 2017 4:42 pm This thread has me thinking, but I haven't made any decisions.

Most likely I'll stand pat with this fund, and perhaps sell it down a bit, but at this point I don't know.

Small Law Survivor.
Small Law Survivor - What did you end up doing with FLPSX and how do you feel about that decision over two years later? Any words of wisdom would be greatly appreciated. I'm dealing with the same dilemma, which I outlined in this post.
viewtopic.php?f=1&t=302201

I'm ready to sell all of my actively managed funds immediately, but I haven't yet because I can't seem to make a decision on whether I should sell FLPSX and Fidelity Growth Company (FDGRX). As you know, it's a big decision, but why I keep stalling and haven't sold all of the funds that I hate while I'm making a decision on these two that I love is beyond me. :annoyed
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by Financologist »

Why not sell other index funds to double or even triple your holdings of this fund?

If that sounded ridiculous then sell. If it sounded tempting then sell faster.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by FinIndyGal »

Financologist wrote: Tue Feb 04, 2020 1:04 am Why not sell other index funds to double or even triple your holdings of this fund?

If that sounded ridiculous then sell. If it sounded tempting then sell faster.
You are way too funny, Thank you for making me laugh...and think this morning.

I still hope Small Law Survivor will let us know what he/she decided to do with Fidelity Low-Priced Stock (FLPSX) and how he/she feels today about that decision. :)
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by BroIceCream »

I used to have the low-priced stock in my Fido 401K. I have since replaced it with FISVX (small cap value index), at a tenth of the ER.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by FinIndyGal »

BroIceCream wrote: Tue Feb 04, 2020 4:17 pm I used to have the low-priced stock in my Fido 401K. I have since replaced it with FISVX (small cap value index), at a tenth of the ER.
That's interesting. Thanks for your feedback. I don't know how long ago you sold FLPSX, but I'd be curious to know if you're happy now with that decision. Deep down my gut tells me I need to sell at least some of mine, if not all of it.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by scooter »

Why?

My wife has had that fund in her IRA forever and is one of two Fidelity funds we own with all the rest in Vanguard.

It has done very well so "if it isn't broken, leave it alone"
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by BroIceCream »

FinIndyGal wrote: Sun Feb 16, 2020 3:21 pm
BroIceCream wrote: Tue Feb 04, 2020 4:17 pm I used to have the low-priced stock in my Fido 401K. I have since replaced it with FISVX (small cap value index), at a tenth of the ER.
... I don't know how long ago you sold FLPSX, but I'd be curious to know if you're happy now with that decision. Deep down my gut tells me I need to sell at least some of mine, if not all of it.
I've had the FISVX for less than a year (it's inception was last summer), but my investment plan includes the need for small&value, and this index fund was cheaper than others, and not actively managed like the LPS fund. I previously had a vanguard fund in my BrokerageLink account, but the expense ratio was higher, and other than the automatic payroll investments, it was difficult to buy/sell for rebalancing (Vanguard changed some of their rules which affected availability of [some] VG mutual fund availability in BrokerageLink). This has resulted in my leaving most of my Vanguard positions, except for an Intl Large-Value fund which I can still contribute to.
The Small/value fund is meeting my requirements.
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sometimesinvestor
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by sometimesinvestor »

Tillinghast is probably a better asset allocator then you are so I suggest using his % in international stocks as a guide to i.e if he increases his share adjusting your share is probably a good idea as doing the opposite if he does that.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by nisiprius »

WildBill wrote: Sat Nov 04, 2017 5:26 pm...It seems that axiomatic that capitalization based indexing will tend to drive overpriced stocks higher as they are bought to maintain their index percentages...
It does "seem axiomatic" if someone says it in a matter-of-fact, confident voice, but it's not so.

Using round, rough, conceptual numbers:

Suppose the market value of Apple stock goes up, and as result the market capitalization of Apple rises from 3% of the total US stock market to 4%. Suppose the Total Stock Market Fund has a total market value of $1,000 billion, including $30 billion in Apple stock. As a result of the rise in prices, the Apple stock that is already in the fund increases in value from $30 billion to $40 billion, i.e. from 3% of the total portfolio to 4%, and thus it continues to match the index, automatically, without buying or selling one share, (and without paying one penny in transaction costs).

Changes in the prices of stocks do not force index funds to buy or sell any stock.

Furthermore, cap-weighted total market index funds are the only funds that are not forced to buy or sell stock. Every other weighting system does. Total market indexing is the only one that doesn't.

When stocks are bought by an index fund, the composition of what the index fund takes is the same as the composition of the whole market, and after it has taken it, the composition of what's left is the same as it was before. The growth of the index fund does not create any relative scarcities of any kind of stocks relative to any other, so it cannot drive the prices of any group of stocks up selectively. Again, it is the only form of stock investing that doesn't. By comparison, small-cap value is about 2% of the market by capitalization. If 20% of investors, weighted by dollars, wanted to have 10% of their portfolio in small-cap value, it would use up all of the small-cap value available and create a scarcity of small-cap value that would result in a relative rise in the price of small-cap value stocks.

Indexers just ladle out an honest share of the pot of soup. If the soup had 20% dumplings in it before, their ladle has 20% dumplings in it, and what's left in the pot for everyone else still has 20% dumplings in it.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by WildBill »

nisiprius wrote: Sun Feb 16, 2020 5:55 pm
WildBill wrote: Sat Nov 04, 2017 5:26 pm...It seems that axiomatic that capitalization based indexing will tend to drive overpriced stocks higher as they are bought to maintain their index percentages...
It does "seem axiomatic" if someone says it in a matter-of-fact, confident voice, but it's not so.

Using round, rough, conceptual numbers:

Suppose the market value of Apple stock goes up, and as result the market capitalization of Apple rises from 3% of the total US stock market to 4%. Suppose the Total Stock Market Fund has a total market value of $1,000 billion, including $30 billion in Apple stock. As a result of the rise in prices, the Apple stock that is already in the fund increases in value from $30 billion to $40 billion, i.e. from 3% of the total portfolio to 4%, and thus it continues to match the index, automatically, without buying or selling one share, (and without paying one penny in transaction costs).

Changes in the prices of stocks do not force index funds to buy or sell any stock.

Furthermore, cap-weighted total market index funds are the only funds that are not forced to buy or sell stock. Every other weighting system does. Total market indexing is the only one that doesn't.

When stocks are bought by an index fund, the composition of what the index fund takes is the same as the composition of the whole market, and after it has taken it, the composition of what's left is the same as it was before. The growth of the index fund does not create any relative scarcities of any kind of stocks relative to any other, so it cannot drive the prices of any group of stocks up selectively. Again, it is the only form of stock investing that doesn't. By comparison, small-cap value is about 2% of the market by capitalization. If 20% of investors, weighted by dollars, wanted to have 10% of their portfolio in small-cap value, it would use up all of the small-cap value available and create a scarcity of small-cap value that would result in a relative rise in the price of small-cap value stocks.

Indexers just ladle out an honest share of the pot of soup. If the soup had 20% dumplings in it before, their ladle has 20% dumplings in it, and what's left in the pot for everyone else still has 20% dumplings in it.
Howdy

Interesting to see this subject again.

I stand corrected on my error, and appreciate the correction. I did not properly analyze the situation where a stock is already included in an index.

Another scenario is where a security increases in market cap sufficiently to merit index inclusion, eg into the S&P 500. At that point wouldn’t the “forced” buying by the indexes drive up the price?

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by Wiggums »

nisiprius wrote: Sun Feb 16, 2020 5:55 pm
WildBill wrote: Sat Nov 04, 2017 5:26 pm...It seems that axiomatic that capitalization based indexing will tend to drive overpriced stocks higher as they are bought to maintain their index percentages...
It does "seem axiomatic" if someone says it in a matter-of-fact, confident voice, but it's not so.

Using round, rough, conceptual numbers:

Suppose the market value of Apple stock goes up, and as result the market capitalization of Apple rises from 3% of the total US stock market to 4%. Suppose the Total Stock Market Fund has a total market value of $1,000 billion, including $30 billion in Apple stock. As a result of the rise in prices, the Apple stock that is already in the fund increases in value from $30 billion to $40 billion, i.e. from 3% of the total portfolio to 4%, and thus it continues to match the index, automatically, without buying or selling one share, (and without paying one penny in transaction costs).

Changes in the prices of stocks do not force index funds to buy or sell any stock.

Furthermore, cap-weighted total market index funds are the only funds that are not forced to buy or sell stock. Every other weighting system does. Total market indexing is the only one that doesn't.

When stocks are bought by an index fund, the composition of what the index fund takes is the same as the composition of the whole market, and after it has taken it, the composition of what's left is the same as it was before. The growth of the index fund does not create any relative scarcities of any kind of stocks relative to any other, so it cannot drive the prices of any group of stocks up selectively. Again, it is the only form of stock investing that doesn't. By comparison, small-cap value is about 2% of the market by capitalization. If 20% of investors, weighted by dollars, wanted to have 10% of their portfolio in small-cap value, it would use up all of the small-cap value available and create a scarcity of small-cap value that would result in a relative rise in the price of small-cap value stocks.

Indexers just ladle out an honest share of the pot of soup. If the soup had 20% dumplings in it before, their ladle has 20% dumplings in it, and what's left in the pot for everyone else still has 20% dumplings in it.
+1
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by RootSki »

Since you hold this in a tax advantaged account, why not use this fund as your source for annual rebalancing? You would slowly whittle down the balance of FSPLX when you buy what ever bond fund you have in your IPS. Cash out just as slowly as you accumulated he shares?
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by dcabler »

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Last edited by dcabler on Mon Feb 17, 2020 9:49 am, edited 1 time in total.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by mcraepat9 »

Small Law Survivor wrote: Thu Nov 02, 2017 4:30 pm
Valuethinker wrote: Thu Nov 02, 2017 4:08 pm - sell if the fund manager retires -that seems to be an iron lesson of these sorts of situations (Peter Lynch, Anthony Bolton etc.)
For sure - they must be paying Tillinghast a fortune to run that fund. Lets see, .068 x $40B = (drum roll) .. $272,000,000/year! I'd guess they're paying Tillinghast north of $25MM/year, maybe as much as $50MM.

But, once he has a few hundred million, why continue working? He can't take it w/him :moneybag
Shouldn’t this be $40B x .0068? .068 is a 6.8% ER
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by FinIndyGal »

scooter wrote: Sun Feb 16, 2020 3:25 pm Why?

My wife has had that fund in her IRA forever and is one of two Fidelity funds we own with all the rest in Vanguard.

It has done very well so "if it isn't broken, leave it alone"
Thanks. In my case, it's because I worry about Joel Tillinghast retiring or leaving the fund for whatever reason.
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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by Dale_G »

I was fortunate enough (well lucky enough) to have the major part of my equity allocation in Low Priced Stock leading up to, and throughout the dot com era. LP was one of the reasons why the first decade of my retirement wasn't close to a "lost decade" for me.

I haven't owned LP for more than a decade, but I still think fondly of the fund. Today, I am strictly index except for a couple of individual stocks.

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Re: Help Me Break My Love Affair With Fidelity Low Priced Stock

Post by dcabler »

One thing I looked at today is totally contrived, but bear with me anyway.
I created a tell-tale chart of FLPSX vs. CRSP's SCV index, adjusted for VSIAX's e/r to create a quasi VSIAX return series.
I used the data from the latest Simba's spreadsheet. I used the actual SCV index where it existed, then Tyler's data for the period before that. Again, both of these are in the latest Simba's spreadsheet. Please note that according to Morningstar's definition, VSIAX is actually a mix of small and mid caps, leaning toward the value side.

Contrived you say? Here come the disclaimers....
- This is a quasi VSIAX data series, as if VSIAX had been using the CRSP index all along. It hasn't. It's changed indexes several times, but has been with CRSP since 2013.
- Past doesn't predict the future, blah blah blah
- We couldn't have known any of this back in 1990 when FLPSX had its first full year of returns.
- etc., etc., etc....

Over the years, FLPSX has ranged from being called a small cap value fund, a mid cap fund, and a mid cap value fund. Joel Tillinghast doesn't really target size directly, but value is clearly on his mind. He has to buy stocks whose price is less than $35 per share or whose earnings yield is at or above the median for the Russell 2000 index. As I seem to recall, the second part was a relatively recent addition. In the early days of this fund, the target price generally put it into the smaller size category. Anyway, because FLPSX has been all over the place in mid/small blend/value, I chose the CRSP SCV index because it seems to have elements of small and mid cap as well according to Morningstar.

Anyway, the tell-tale of this little experiment has some interesting results. For the most part, the long term performance has been approximately on par with my contrived CRSP-based index fund. Sometimes it underperformed some, sometimes it outperformed some. However, there were 2 years when FLPSX really outperformed: 1990 (the inception date) by 16% and 2001 by 21%. Take those two datapoints out of the sequence and the performance is close enough to being identical over the time period. To be fair, my pseudo-fund also had one big year as well, in 2016 where it outperformed flpsx by 16%

So out of the 30 year existence of this fund, the manager did something exceptional twice, and one time was the first full year of its existence.
Did Tillinghast has some special mojo only a couple of times? How much was luck? Not sure there is any real way to know, but it's been close to 20 years since it happened last. If I were still inclined to look for actively managed funds, I wouldn't necessarily look for a fund that beat an index each and every year, but I'd like to see at least a little more consistency.

I still own some FLPSX in my taxable account. It's down to less than 7% of my portfolio. It doesn't appear to be hurting anything, but I have so much cap gains built up that I don't want to take a tax hit by selling it. Selling it can wait until after I'm retired or if there is a correction where I can tax-harvest as least some of it. Till then, any cap gains/dividends it throws off are directed elsewhere.

Cheers
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