Buying primecap now - a mistake?

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txranger
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Buying primecap now - a mistake?

Post by txranger » Sun Apr 29, 2018 6:26 am

Hi all — I m considering buying primecap odyssey growth in my Roth IRA w vanguard. It’s $20/transaction and a bit expensive at 0.66 ER. I wanted to buy primecap vanguard funds but don’t qualify w balance/closed new investors.

I figure primecap would outperform most investments over next 20-30 yrs and I get the growth tax free. It’s a little more volatile than sp500 but similar max drawdown.

Do you think it’s a mistake to buy it now that we r prob at the top of the bull market?

Tnx appr

gundlached
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Re: Buying primecap now - a mistake?

Post by gundlached » Sun Apr 29, 2018 6:39 am

Do you have an asset allocation? Does this stock fund fit as part of your stock allocation?

txranger
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Re: Buying primecap now - a mistake?

Post by txranger » Sun Apr 29, 2018 6:44 am

Roughly 60/40. Stock/bonds. Of the bonds, I have about a 3rd in cash in vanguard muni market fund and similar as bonds r treading water now in total return.
Not sure if this one really fits but it’s not a huge amount, about 60k in Roth, a small portion of my nw, <5%. Current I have vanguard mod growth and Wellington making up all of my retirement accounts.

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sperry8
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Re: Buying primecap now - a mistake?

Post by sperry8 » Sun Apr 29, 2018 8:45 am

I can't speak to the top or bottom of where we are now. No one knows. What I can say is the Primecap team is one of the best teams I own. They have outperformed the market for over a decade. So if you do choose to go active, I'd highly recommend them. Most Bogleheads are purists however and would not recommend active managers.
Humbling BH contest results: 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

tibbitts
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Re: Buying primecap now - a mistake?

Post by tibbitts » Sun Apr 29, 2018 8:53 am

The majority of the times I've bought active funds because they had outperformed competitors for decades, had "team" management, etc. etc. they've underperformed going forward. Until I gave up on them many years later, at which point they started outpeforming again. I would say to set your exit strategy now - understand just how long you'll tolerate underperformance. In fairness I've bought a few funds that have continued to outperform. You just have to treat it as a game/hobby and not take it seriously.

Oh, I've owned all the Vanguard Primecap family at one time or another and still own two of them, but have so little invested that they're clearly in the hobby category.

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sperry8
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Re: Buying primecap now - a mistake?

Post by sperry8 » Sun Apr 29, 2018 8:55 am

tibbitts wrote:
Sun Apr 29, 2018 8:53 am
The majority of the times I've bought active funds because they had outperformed competitors for decades, had "team" management, etc. etc. they've underperformed going forward. Until I gave up on them many years later, at which point they started outpeforming again. I would say to set your exit strategy now - understand just how long you'll tolerate underperformance. In fairness I've bought a few funds that have continued to outperform. You just have to treat it as a game/hobby and not take it seriously.

Oh, I've owned all the Vanguard Primecap family at one time or another and still own two of them, but have so little invested that they're clearly in the hobby category.
In that case... please don't buy more Primecap anytime soon!! :P
Humbling BH contest results: 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

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Kenkat
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Re: Buying primecap now - a mistake?

Post by Kenkat » Sun Apr 29, 2018 10:03 am

This is a question that does not really have an answer. I have owned Vanguard Primecap (the original fund) since 1998. It has been an excellent performer, low turnover and its expense ratio is only slightly higher than typical index funds. Whether the excellent performance continues in the future? There is no way to know that.

I will say that Primecap invests in companies smaller in average than a fund such as Index 500 or even Total Stock Market and that has helped returns. Is that because the management team is smart or is it just a particular style being in the right place at the right time? I would say it might be some of both.

I would also not assume that Primecap will fare worse than an index fund going forward from a market peak. In fact, the opposite might be true as active funds tend to hold more cash and that can soften losses. Primecap did avoid some of the drop 2000-2002, faring better than market indexes but got hit equally hard if not a little worse in the 2008-2009 financial crisis. Again, was 2000-2002 good investing strategies or just random luck?

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cfs
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Re: Buying primecap now - a mistake?

Post by cfs » Sun Apr 29, 2018 11:14 am

" I m considering buying primecap odyssey growth in my Roth IRA w vanguard."

Primecap Odyssey Growth is a good fund, and you can pick any of those listed below (some of them are closed to new investors).

- The Dynamic Duo [Wellesley, Wellington]

- The Steady Eddies [Equity Income, Dividend Growth]

- The Trifecta [Primecap, Primecap Core, Capital Opportunity]

Good luck with your actively managed mutual funds.

My signature applies, y gracias por leer ~cfs~
~ Member of the Active Retired Force since 2014 ~

txranger
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Re: Buying primecap now - a mistake?

Post by txranger » Sun Apr 29, 2018 11:23 am

Right, I would have liked to pick up vanguard primecap funds but they r closed to me. Don’t have the flagship level...

drk
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Re: Buying primecap now - a mistake?

Post by drk » Sun Apr 29, 2018 11:42 am

txranger wrote:
Sun Apr 29, 2018 6:26 am
I figure primecap would outperform most investments over next 20-30 yrs and I get the growth tax free. It’s a little more volatile than sp500 but similar max drawdown.

Do you think it’s a mistake to buy it now that we r prob at the top of the bull market?
Historical comparisons between an active fund and the S&P 500 are not particularly useful when trying to predict future returns, but I have no reason to think that Primecap will outperform any broadly diversified index fund. Moreover, the tax-free growth is not unique to your holding this fund.

Do I think it's a mistake? I have no idea how to answer that for you, but I don't think that concerns about being at the top are accurate considering that we're still about 6% off the YTD high. I can say that I do not own this fund, have any plans to buy it, or even really consider it a viable option for me. Your mileage, though, may vary.

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Alexa9
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Re: Buying primecap now - a mistake?

Post by Alexa9 » Sun Apr 29, 2018 11:49 am

Past performance is not an indicator of future performance. In fact, good recent past performance is often an indicator of poor future performance according to Bogle. It's possible you will outperform Total Stock Market, but it's possible you won't. Nobody knows nothing about the future.

investor
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Re: Buying primecap now - a mistake?

Post by investor » Sun Apr 29, 2018 12:13 pm

you can buy POGRX & POSKX Primecap oddessey funds directly from Primecap or thru vanguard VBS. They are stilll open.

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Miriam2
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Re: Buying primecap now - a mistake?

Post by Miriam2 » Sun Apr 29, 2018 1:33 pm

Two earlier threads on the Primecap funds -
viewtopic.php?f=1&t=247505
viewtopic.php?f=1&t=231541

If you want to buy it, buy it now before it closes :wink:

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whodidntante
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Re: Buying primecap now - a mistake?

Post by whodidntante » Sun Apr 29, 2018 1:41 pm

I can't say it's a mistake for you to buy primecap, but it would be a mistake for me to buy it. I target a small and value tilt. That fund overweights growth stocks. And I don't believe stock picking leads to long term outperformance after costs.

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JoMoney
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Re: Buying primecap now - a mistake?

Post by JoMoney » Sun Apr 29, 2018 2:26 pm

My general thinking is that if you think it might be a mistake, it's a mistake.
Warren Buffett is said to have three buckets for investments that interest him: "Yes, no, and too hard"
If you're questioning it, it belongs in the "too hard" pile.
I'm not a fan of active funds for a variety of reasons, they're difficult to evaluate, they bring in manager risks that are just too hard to evaluate just on the risks, let alone on the idea that they have a secret sauce to bring in extra returns.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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