Looking for an example of a fund which has beat its index for 30 years

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anonyvestor
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Looking for an example of a fund which has beat its index for 30 years

Post by anonyvestor » Wed Mar 07, 2018 2:43 am

While I am used to hearing statements declaring how few active funds beat their index (presumably over a year) I am interested in examples of funds which have beat a major index over prolonged intervals.

If the interval is sufficiently brief (e.g. one day,) I imagine nearly 50% of funds would beat the index. But as the interval extends, I would suspect virtually no active funds beat their index.

I am looking for examples of active funds whose returns (after considering costs) have beat a major index for decades. Better yet, funds which have beat a relevant index fund over decades.

What's your best contender?

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digarei
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by digarei » Wed Mar 07, 2018 3:24 am

anonyvestor wrote:
Wed Mar 07, 2018 2:43 am
While I am used to hearing statements declaring how few active funds beat their index (presumably over a year) I am interested in examples of funds which have beat a major index over prolonged intervals.

If the interval is sufficiently brief (e.g. one day,) I imagine nearly 50% of funds would beat the index. But as the interval extends, I would suspect virtually no active funds beat their index.

I suspect you’re right.

I am looking for examples of active funds whose returns (after considering costs) have beat a major index for decades. Better yet, funds which have beat a relevant index fund over decades.

This question comes immediately to mind:

Why?


What's your best contender?

Your parameters are a bit fuzzy. What is a prolonged interval? How does one define decades? (20, 30, 40 years?) I’d be surprised to discover any active fund that has beaten its index after costs for a decade or more is still open to new investors.

Regardless, should you be able to identify such a stellar performer, of what use would this be to your own investment plan? You weren’t invested in this fund in the past so as to be able to benefit from these returns. And there’s no assurance that this active fund will outperform in the future.

In fact, it’s much more likely to underperform. Top decile returns can become bottom decile returns.

I’m largely invested in index funds. The few active funds I hold at Vanguard are relatively inexpensive—low turnover, expense ratio less than 35 basis points. My portfolio’s returns have been better (closer to benchmark) since I stopped adding new funds and churning old ones.
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by fennewaldaj » Wed Mar 07, 2018 4:53 am

It seems like you can find a decent amount of funds that look something like this (Fidelity Low Priced Stock)

Since inception
http://quotes.morningstar.com/chart/fun ... ture=en-US

Out performance early then more normal performance more recently

10 year chart

http://quotes.morningstar.com/chart/fun ... ture=en-US

There are a number of funds that seem to look kinda similar like many of the American Funds

chatbotte
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by chatbotte » Wed Mar 07, 2018 5:05 am

anonyvestor,

Clearly, there is variation in stock returns: some stocks have higher returns than others, and the benchmark is a weighted average of those returns. So it's mathematically certain that some active investors will beat their benchmark, before costs. The question is, is this due to luck or skill?

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by B. Wellington » Wed Mar 07, 2018 6:00 am

The problem with beating a benchmark index with any significant amount also comes down to timing. For example, investing all (or most) of your money on the inception date or very good timing of your DCA contributions.

I would wager that if you missed even (a few) of the very best days of the fund and then taking fees into account, you will most likely fall short of your benchmark index. If you do outperform, I would also wager that the outperformance would be very small.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by jts » Wed Mar 07, 2018 6:08 am

There are infinite ways to compare performance so it becomes an endless argument. To test this, how about PRBLX which has returned 10.74 over 25 years versus the 500 and Russell 1000 returns of 9.81 and 9.97 respectively. Of course you can then pick at when and how and the argument continues, because each individual looks for different attributes from investments. Another note for performance, mutual fund performance comes from closing prices which already have expenses deducted. Average annual returns are a poor judge of history and are very misleading.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by dkturner » Wed Mar 07, 2018 8:01 am

Vanguard STAR Fund. It beat its benchmark for as long as it has been in existence (a few weeks shy of 33 years) by 29 basis points per year. STAR is a collection of Vanguard actively managed stock and bond funds.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by Longdog » Wed Mar 07, 2018 8:06 am

Without doing the research, and with the caveat that it most likely hasn't beaten its index regularly for years, Fidelity Magellan, in its heyday and under the management of Peter Lynch, very likely did beat its index for a decade or more in the 80s/90s. Since this is your research project, not mine :happy, I offer it only as a fund for you to investigate. It certainly was a noteworthy fund. I will be curious whether you find it meets your criteria.
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by goblue100 » Wed Mar 07, 2018 8:48 am

Longdog wrote:
Wed Mar 07, 2018 8:06 am
Without doing the research, and with the caveat that it most likely hasn't beaten its index regularly for years, Fidelity Magellan, in its heyday and under the management of Peter Lynch, very likely did beat its index for a decade or more in the 80s/90s. Since this is your research project, not mine :happy, I offer it only as a fund for you to investigate. It certainly was a noteworthy fund. I will be curious whether you find it meets your criteria.
I don't think Magellan has beaten its index the last 10. Fidelity Contrafund is a candidate, its inception date is 1967 and its life time return rate is 12.67% annualized. According to this calculator:
https://dqydj.com/sp-500-return-calculator/

The S&P 500 returned 10.137% from 2/1967 to 12/2017.
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by Dottie57 » Wed Mar 07, 2018 9:06 am

I am not sure a passive index fund should beat its index. If the fund really is representative of the index it should trail the index by the funds ER.

Is OP looking at actively managed funds? How does one know the appropriate index to compare to an active fund? Are the risks of the index and the fund the same?

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by midareff » Wed Mar 07, 2018 9:08 am

digarei wrote:
Wed Mar 07, 2018 3:24 am
anonyvestor wrote:
Wed Mar 07, 2018 2:43 am
While I am used to hearing statements declaring how few active funds beat their index (presumably over a year) I am interested in examples of funds which have beat a major index over prolonged intervals.

If the interval is sufficiently brief (e.g. one day,) I imagine nearly 50% of funds would beat the index. But as the interval extends, I would suspect virtually no active funds beat their index.

I suspect you’re right.

I am looking for examples of active funds whose returns (after considering costs) have beat a major index for decades. Better yet, funds which have beat a relevant index fund over decades.

This question comes immediately to mind:

Why?


What's your best contender?

Your parameters are a bit fuzzy. What is a prolonged interval? How does one define decades? (20, 30, 40 years?) I’d be surprised to discover any active fund that has beaten its index after costs for a decade or more is still open to new investors.

Regardless, should you be able to identify such a stellar performer, of what use would this be to your own investment plan? You weren’t invested in this fund in the past so as to be able to benefit from these returns. And there’s no assurance that this active fund will outperform in the future.

In fact, it’s much more likely to underperform. Top decile returns can become bottom decile returns.

I’m largely invested in index funds. The few active funds I hold at Vanguard are relatively inexpensive—low turnover, expense ratio less than 35 basis points. My portfolio’s returns have been better (closer to benchmark) since I stopped adding new funds and churning old ones.
Legg Mason Value Trust with Bill Miller as lead beat the S&P Index 17 consecutive years running, before giving it all back and more. Live and die by the same sword.

Dottie57
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by Dottie57 » Wed Mar 07, 2018 9:13 am

Dottie57 wrote:
Wed Mar 07, 2018 9:06 am
I am not sure a passive index fund should beat its index. If the fund really is representative of the index it should trail the index by the funds ER. (Not relevant. Too early in morning to read correctly)

Is OP looking at actively managed funds? How does one know the appropriate index to compare to an active fund? Are the risks of the index and the fund the same?

jts
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by jts » Wed Mar 07, 2018 9:28 am

Another aspect to this, is that investing styles go in and out of favor. This includes indexes, the Total Stock fund (VTSMX) was crushed 3 years straight in 2000, 2001,2002 and did not recover the loss until 2008 and was then crushed again, during these times conservative funds beat it until the bull returns. The pendulum swings back and forth.

staythecourse
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by staythecourse » Wed Mar 07, 2018 9:32 am

If Mr. Ferri drops by and is kind enough he will post his excellent graph from "Power of Passive Investing". Another example of how brilliant Mr. Bogle is/ was is he kept a record of the equity funds that existed when he started his now Vanguard sp500 index in mid 1970's. At that time there were some 340 equity funds. Fast forward 25 years (shown in chart I was mentioning) a total of 12 beat his index. Of those 12 only 5-6 beat them by more then 1-2% (VERY conservative guesstimate of higher cost of active funds). That is it. 5-6 out of 340+ funds. Mind you that is only HALF of an investors life (25 years) do chance of beating an index falls every year.

Another aspect of this that most folks don't think about is results are measured in time weighted, i.e. you put $1 in in 1970 then how much would it have made by 1980. The problem with ACTIVE funds is the FEW that do beat the index by MORE then their higher costs (let's just say 2% but MUCH higher especially in high tax brackets folks) they USUALLY do it very early on in their lifespan. So if you were lucky (that is the correct adjective) and put your money in some fledgling mutual fund for the heck of it and guessed correct you had a VERY SMALL chance of success. However, seeing the returns on a DOLLAR weighted basis shows over and over once the fledgling fund get successful folks find out about it and then it starts to tank. So the weighted returns may look great, but the reality is the dollar weighted returns are not and that is the return MOST of the investors would have experienced. An academic will likely make a very good argument this is one of the BIG reasons the best performing funds the last 5 years usually become the worst performing funds the next 5 years.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by JW-Retired » Wed Mar 07, 2018 9:45 am

anonyvestor wrote:
Wed Mar 07, 2018 2:43 am
I am looking for examples of active funds whose returns (after considering costs) have beat a major index for decades. Better yet, funds which have beat a relevant index fund over decades.
I've owned this one since 1980-something: Fidelity Contrafund (FCNTX)
Don't know what a relevant index is but it seems to beat the US market over most time frames.

We are trapped in this fund now by the unrealized gains, but it's only a few percent of our taxable portfolio. About everything else we have is index funds. A definite downside of FCNTX is it has a lot of cap gains distributions. It burned up my carryover loss bank from 2008/9 way too fast. I would not buy it today.
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by oldcomputerguy » Wed Mar 07, 2018 9:47 am

dkturner wrote:
Wed Mar 07, 2018 8:01 am
Vanguard STAR Fund. It beat its benchmark for as long as it has been in existence (a few weeks shy of 33 years) by 29 basis points per year.
STAR's benchmark is the "STAR Composite Index", which is described by Vangard as:
  • 62.5% Dow Jones U.S. Total Stock Market Index, 25% Bloomberg Barclays U.S. Aggregate Bond Index, and 12.5% Citigroup 3 Month U.S. Treasury Bill Index through December 31, 2002;
  • 50% Dow Jones U.S. Total Stock Market Index, 25% Bloomberg Barclays U.S. Aggregate Bond Index, 12.5% Bloomberg Barclays U.S. 1–5 Year Credit Bond Index, and 12.5% MSCI EAFE Index through April 22, 2005;
  • 50% MSCI US Broad Market Index, 25% Bloomberg Barclays U.S. Aggregate Bond Index, 12.5% Bloomberg Barclays U.S. 1–5 Year Credit Bond Index, and 12.5% MSCI EAFE Index through September 30, 2010;
  • 43.75% MSCI US Broad Market Index, 25% Bloomberg Barclays U.S. Aggregate Bond Index, 12.5% Bloomberg Barclays U.S. 1–5 Year Credit Bond Index, and 18.75% MSCI All Country World Index ex USA thereafter.
The "benchmark" therefore has drifted over the life of the fund from an allocation of 62.5% TSM / 37.5% FI to 50% TSM / 12.5% EAFE / 37.5% FI, then to 43.75% TSM / 18.75% ACWI Ex-US / 37.5% FI.

I may get beat up for this, but for purposes of rating this fund's performance long-term, I'm not sure how meaningful it is to compare the fund to this benchmark.
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by dbr » Wed Mar 07, 2018 10:03 am

The question is ill-formed. A fund that has an index is an index fund and if by some quirk it has beat its index then the fund management has screwed up. Correct performance would be to lag the index by the costs of the fund.

If the question is has a fund beaten its benchmark, then that is not a meaningful question because if the fund is not actually invested in its benchmark, then the benchmark is just a marketing tool that might generally describe the intent of the fund or more nefariously be an inappropriate comparison used to sell the fund. You could say that as with an index fund beating the benchmark is evidence of poor execution of the investment strategy or lying about what the investment strategy actually is.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by JBTX » Wed Mar 07, 2018 10:08 am

I have several funds that seem to have beaten applicable indexes over the long term and even marginally in the short term. While I believe in indexing and ultimately believe low fee is best, I continue to monitor these and have not been compelled to dump them yet

Fidelity Contrafund
Fidelity low priced stock
Vanguard Wellington and Wellesley income

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by dkturner » Wed Mar 07, 2018 10:10 am

oldcomputerguy wrote:
Wed Mar 07, 2018 9:47 am
dkturner wrote:
Wed Mar 07, 2018 8:01 am
Vanguard STAR Fund. It beat its benchmark for as long as it has been in existence (a few weeks shy of 33 years) by 29 basis points per year.
STAR's benchmark is the "STAR Composite Index", which is described by Vangard as:
  • 62.5% Dow Jones U.S. Total Stock Market Index, 25% Bloomberg Barclays U.S. Aggregate Bond Index, and 12.5% Citigroup 3 Month U.S. Treasury Bill Index through December 31, 2002;
  • 50% Dow Jones U.S. Total Stock Market Index, 25% Bloomberg Barclays U.S. Aggregate Bond Index, 12.5% Bloomberg Barclays U.S. 1–5 Year Credit Bond Index, and 12.5% MSCI EAFE Index through April 22, 2005;
  • 50% MSCI US Broad Market Index, 25% Bloomberg Barclays U.S. Aggregate Bond Index, 12.5% Bloomberg Barclays U.S. 1–5 Year Credit Bond Index, and 12.5% MSCI EAFE Index through September 30, 2010;
  • 43.75% MSCI US Broad Market Index, 25% Bloomberg Barclays U.S. Aggregate Bond Index, 12.5% Bloomberg Barclays U.S. 1–5 Year Credit Bond Index, and 18.75% MSCI All Country World Index ex USA thereafter.
The "benchmark" therefore has drifted over the life of the fund from an allocation of 62.5% TSM / 37.5% FI to 50% TSM / 12.5% EAFE / 37.5% FI, then to 43.75% TSM / 18.75% ACWI Ex-US / 37.5% FI.

I may get beat up for this, but for purposes of rating this fund's performance long-term, I'm not sure how meaningful it is to compare the fund to this benchmark.
Vanguard changes the benchmark for the STAR fund when the composition of the STAR fund changes. To make changes in the composition of the fund, without contemporaneously changing the benchmark to reflect these changes, would be fraudulent. The most recent change was in 2010, when the international equity exposure was increased from 12.5% to 18.75%. Are you suggesting that the benchmark should have been left alone, even though international equity exposure was increased by 50%? Any honest investment manager would have made the appropriate benchmark change, as Vanguard did.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by jhfenton » Wed Mar 07, 2018 10:10 am

Dottie57 wrote:
Wed Mar 07, 2018 9:06 am
I am not sure a passive index fund should beat its index. If the fund really is representative of the index it should trail the index by the funds ER.
Not necessarily, especially with small caps. Neither index returns nor the expense ratio take into account securities lending revenue.

VSS (Vanguard FTSE All World ex-US Small Cap) has beaten its index by roughly 10 bp per year over the trailing 5 years, with a current ER of 13 bp (and higher for most of that 5 years).

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by KSActuary » Wed Mar 07, 2018 10:11 am

T. Rowe Price Capital Appreciation for 32 years

https://www3.troweprice.com/fb2/fbkweb/ ... cker=PRWCX

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by dbr » Wed Mar 07, 2018 10:12 am

JBTX wrote:
Wed Mar 07, 2018 10:08 am
I have several funds that seem to have beaten applicable indexes over the long term and even marginally in the short term. While I believe in indexing and ultimately believe low fee is best, I continue to monitor these and have not been compelled to dump them yet

Fidelity Contrafund
Fidelity low priced stock
Vanguard Wellington and Wellesley income
What applicable index do those funds have? I maintain that by definition a fund that is not an index fund does not have an applicable index. Anyone can compare the risk and return of one portfolio to that of another one which only proves that if an investor had chosen the one portfolio they would gotten the results of that portfolio and vice versa.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by dbr » Wed Mar 07, 2018 10:14 am

jhfenton wrote:
Wed Mar 07, 2018 10:10 am
Dottie57 wrote:
Wed Mar 07, 2018 9:06 am
I am not sure a passive index fund should beat its index. If the fund really is representative of the index it should trail the index by the funds ER.
Not necessarily, especially with small caps. Neither index returns nor the expense ratio take into account securities lending revenue.

VSS (Vanguard FTSE All World ex-US Small Cap) has beaten its index by roughly 10 bp per year over the trailing 5 years, with a current ER of 13 bp (and higher for most of that 5 years).
Yes, the original idea is correct providing we say net expenses rather than ER. The ER does not include all sources of cost and income, but the idea is correct. Otherwise we have tracking error, aka the fund management didn't do their job. Also, in my book this is the only legitimate use of the term tracking error, though people use it in confusing ways elsewhere.

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Vanguard Total Market Index Fund

Post by Taylor Larimore » Wed Mar 07, 2018 10:14 am

anonyvestor wrote:
Wed Mar 07, 2018 2:43 am
While I am used to hearing statements declaring how few active funds beat their index (presumably over a year) I am interested in examples of funds which have beat a major index over prolonged intervals.

If the interval is sufficiently brief (e.g. one day,) I imagine nearly 50% of funds would beat the index. But as the interval extends, I would suspect virtually no active funds beat their index.

I am looking for examples of active funds whose returns (after considering costs) have beat a major index for decades. Better yet, funds which have beat a relevant index fund over decades.

What's your best contender?
anonyvestor:

In preparing my book, "The Bogleheads' Guide to The Three-Fund Portfolio," I asked John Rekenthaler at Morningstar a similar question about Vanguard's Total Market Index Fund. This was his e-mailed reply:

"VTSAX (Vanguard Total Market Index Fund Admiral) has always beaten its category average. It is 16 for 16, from 2001 through 2016."

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

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Re: Vanguard Total Market Index Fund

Post by dbr » Wed Mar 07, 2018 10:24 am

Taylor Larimore wrote:
Wed Mar 07, 2018 10:14 am
anonyvestor wrote:
Wed Mar 07, 2018 2:43 am
While I am used to hearing statements declaring how few active funds beat their index (presumably over a year) I am interested in examples of funds which have beat a major index over prolonged intervals.

If the interval is sufficiently brief (e.g. one day,) I imagine nearly 50% of funds would beat the index. But as the interval extends, I would suspect virtually no active funds beat their index.

I am looking for examples of active funds whose returns (after considering costs) have beat a major index for decades. Better yet, funds which have beat a relevant index fund over decades.

What's your best contender?
anonyvestor:

In preparing my book, "The Bogleheads' Guide to The Three-Fund Portfolio," I asked John Rekenthaler at Morningstar a similar question about Vanguard's Total Market Index Fund. This was his e-mailed reply:

"VTSAX (Vanguard Total Market Index Fund Admiral) has always beaten its category average. It is 16 for 16, from 2001 through 2016."

Best wishes
Taylor
I don't understand. The category average is not the index. I don't know what the tabulation of total stock market fund costs is. Probably there is someone out there that has lower costs than the retail Vanguard TSM fund which would then have a tad higher return closer to the index than VTSAX. The difference would be pretty immaterial. A different question is how consistently VTSAX tracks its index allowing for costs. I imagine it is very good. There may be other funds that have greater tracking error. Tracking error could result in higher return than the index.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by Peculiar_Investor » Wed Mar 07, 2018 10:27 am

anonyvestor wrote:
Wed Mar 07, 2018 2:43 am
While I am used to hearing statements declaring how few active funds beat their index (presumably over a year) I am interested in examples of funds which have beat a major index over prolonged intervals.

If the interval is sufficiently brief (e.g. one day,) I imagine nearly 50% of funds would beat the index. But as the interval extends, I would suspect virtually no active funds beat their index.

I am looking for examples of active funds whose returns (after considering costs) have beat a major index for decades. Better yet, funds which have beat a relevant index fund over decades.

What's your best contender?
In addition to the examples and counterexamples provided by others, I would suggest you might Google Nassim Nicholas Taleb’s 2007 book, The Black Swan and read the allegory of a turkey that is fed by a farmer every morning for 1,000 days.

Unfortunately for the turkey, day 1001 arrives.

The same applies for data mining/back testing past performance. If you find a fund that has beaten an index for 30 years, can your find the advisor or financial reporter who predicted this 30 years ago?

Or consider the coin flippers in Buffett's article, titled “The Superinvestors of Graham-and-Doddsville,”. Many are winners for a long time, until they aren't. They just don't know the day the flip will go against them.
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by oldcomputerguy » Wed Mar 07, 2018 10:32 am

dkturner wrote:
Wed Mar 07, 2018 10:10 am
Vanguard changes the benchmark for the STAR fund when the composition of the STAR fund changes.
That's kind of my point. Perhaps I'm wrong (I've been wrong before), but I can't help having the thought that changing the benchmark when you change the fund is similar to the arguments sometimes made against some ETFs, namely that the supposed "indices" against which some ETFs track are "manufactured" indices. This seems to me to be a "manufactured" benchmark.

That being said, I have no idea how one would benchmark STAR against any other existing benchmark; coming up with a standard against which to measure an all-in-one fund like STAR is problematic. I think it's sort of like someone else said in this thread: how does one "benchmark" an actively-managed fund? It's a conundrum.

My original point was that I'm not sure that saying "STAR beat its benchmark" carries quite the same weight if there is uncertainty over just what the benchmark should be. I'm thinking that the Vanguard guys have a good rationale for constructing this benchmark, but as I said, I don't know enough to know how valid that is.
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by dbr » Wed Mar 07, 2018 10:34 am

oldcomputerguy wrote:
Wed Mar 07, 2018 10:32 am
dkturner wrote:
Wed Mar 07, 2018 10:10 am
Vanguard changes the benchmark for the STAR fund when the composition of the STAR fund changes.
That being said, I have no idea how one would benchmark STAR against any other existing benchmark; coming up with a standard against which to measure an all-in-one fund like STAR is problematic. I think it's sort of like someone else said in this thread: how does one "benchmark" an actively-managed fund? It's a conundrum.

It isn't a conundrum. The question has a simple and logically correct answer, which is that you don't.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by oldcomputerguy » Wed Mar 07, 2018 10:38 am

dbr wrote:
Wed Mar 07, 2018 10:34 am
oldcomputerguy wrote:
Wed Mar 07, 2018 10:32 am
dkturner wrote:
Wed Mar 07, 2018 10:10 am
Vanguard changes the benchmark for the STAR fund when the composition of the STAR fund changes.
That being said, I have no idea how one would benchmark STAR against any other existing benchmark; coming up with a standard against which to measure an all-in-one fund like STAR is problematic. I think it's sort of like someone else said in this thread: how does one "benchmark" an actively-managed fund? It's a conundrum.

It isn't a conundrum. The question has a simple and logically correct answer, which is that you don't.
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by TareNeko » Wed Mar 07, 2018 10:43 am

That would be true if the distribution of all returns is Gaussian. I don't think that would be the case, since that would imply investing strategy of actively managed funds is purely random, which it isn't.
anonyvestor wrote:
Wed Mar 07, 2018 2:43 am
If the interval is sufficiently brief (e.g. one day,) I imagine nearly 50% of funds would beat the index.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by bgf » Wed Mar 07, 2018 11:06 am

Edward Thorp's hedge fund earned over 20% a year for 30 years.

Jim Simons' Renaissance Technologies has performed perhaps even better.
Last edited by bgf on Wed Mar 07, 2018 11:09 am, edited 1 time in total.
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by Dottie57 » Wed Mar 07, 2018 11:09 am

dbr wrote:
Wed Mar 07, 2018 10:14 am
jhfenton wrote:
Wed Mar 07, 2018 10:10 am
Dottie57 wrote:
Wed Mar 07, 2018 9:06 am
I am not sure a passive index fund should beat its index. If the fund really is representative of the index it should trail the index by the funds ER.
Not necessarily, especially with small caps. Neither index returns nor the expense ratio take into account securities lending revenue.

VSS (Vanguard FTSE All World ex-US Small Cap) has beaten its index by roughly 10 bp per year over the trailing 5 years, with a current ER of 13 bp (and higher for most of that 5 years).
Yes, the original idea is correct providing we say net expenses rather than ER. The ER does not include all sources of cost and income, but the idea is correct. Otherwise we have tracking error, aka the fund management didn't do their job. Also, in my book this is the only legitimate use of the term tracking error, though people use it in confusing ways elsewhere.
A quick question:

I own VIIIX Vanguard Institutional index in my 401k. Expense ratio is .02%. I can't find any other fees or expenses on this fund. What other expenses are there?

TIA.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by Doc » Wed Mar 07, 2018 11:17 am

Is this what you're looking for?

3 month rolling return chart:

Image

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

(The benchmark is hidden down in the bottom line except for the last few years.)
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by Jack FFR1846 » Wed Mar 07, 2018 11:18 am

An index is going to change over time. GE is the only original company to the S&P 500 if my memory is correct.
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by dkturner » Wed Mar 07, 2018 11:36 am

dbr wrote:
Wed Mar 07, 2018 10:34 am
oldcomputerguy wrote:
Wed Mar 07, 2018 10:32 am
dkturner wrote:
Wed Mar 07, 2018 10:10 am
Vanguard changes the benchmark for the STAR fund when the composition of the STAR fund changes.
That being said, I have no idea how one would benchmark STAR against any other existing benchmark; coming up with a standard against which to measure an all-in-one fund like STAR is problematic. I think it's sort of like someone else said in this thread: how does one "benchmark" an actively-managed fund? It's a conundrum.

It isn't a conundrum. The question has a simple and logically correct answer, which is that you don't.
I don’t believe all of these mutual fund providers are selecting benchmarks for nefarious reasons. I think they come up with a benchmark because the SEC makes them select one. Maybe you should contact the SEC and point out that their regulations are causing fund managers to, deliberately or otherwise, mislead investors?

How would you suggest that an investor determine whether her mutual fund manager is doing a good job or a poor job?

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by inbox788 » Wed Mar 07, 2018 11:39 am

I would guess the majority of funds don't make it 30 years so you'll have a high degree of survival bias. You also have the problem of funds changing managers and style over long periods and choosing poor performing index to compare to.

Regardless, I'm surprised to find some really old funds still hanging round: https://www.investopedia.com/ask/answer ... lfunds.asp

Morningstar says MITTX beat the "large blend" (what is this benchmark?), but if you look since 1970 vs available SP500 data and 1990 vs DJIA, it fails to beat those to date.

http://quotes.morningstar.com/chart/fun ... 2%3A955%7D

Pioneer Fund (PIODX) looks like the winner in the group and one other fun beat the SP500 since 1970, but none look like they beat the DJIA since 1990.

http://quotes.morningstar.com/chart/fun ... 2%3A955%7D

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by dkturner » Wed Mar 07, 2018 11:55 am

oldcomputerguy wrote:
Wed Mar 07, 2018 10:38 am
dbr wrote:
Wed Mar 07, 2018 10:34 am
oldcomputerguy wrote:
Wed Mar 07, 2018 10:32 am
dkturner wrote:
Wed Mar 07, 2018 10:10 am
Vanguard changes the benchmark for the STAR fund when the composition of the STAR fund changes.
That being said, I have no idea how one would benchmark STAR against any other existing benchmark; coming up with a standard against which to measure an all-in-one fund like STAR is problematic. I think it's sort of like someone else said in this thread: how does one "benchmark" an actively-managed fund? It's a conundrum.

It isn't a conundrum. The question has a simple and logically correct answer, which is that you don't.
:beer
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If an actively managed fund manager trails her benchmark knee jerk indexers love to point out she is a failure. But, if an actively managed fund manager exceeds her benchmark, knee jerk indexers claim it’s meaningless - because her benchmark can’t possibly be used to document the success of her performance.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by MnD » Wed Mar 07, 2018 12:26 pm

I've owned Dodge and Cox Stock almost 30 years since 1990 and below is a full 30-year growth of 10K chart relative to the S&P 500 index total return. Also below is the total return chart for Dodge and Cox Income since inception 29.x years relative to the aggregate bond index. I was a "pioneer" (first day of issue May 1, 2001) shareholder of Dodge and Cox International Stock so lastly I've also thrown in a chart for that fund since inception (almost 18 years) relative to the MSCI ACWI (ex-US). I am also a near-pioneer investor in Dodge and Cox Global Bond since 2014, but it will be a few decades till I see how that one pans out. :beer

Dodge and Cox Stock - 30 years
Image

Dodge and Cox Income - 29.x years
Image

Dodge and Cox International Stock - almost 17 years
Image
Last edited by MnD on Wed Mar 07, 2018 12:32 pm, edited 1 time in total.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by JBTX » Wed Mar 07, 2018 12:32 pm

dbr wrote:
Wed Mar 07, 2018 10:12 am
JBTX wrote:
Wed Mar 07, 2018 10:08 am
I have several funds that seem to have beaten applicable indexes over the long term and even marginally in the short term. While I believe in indexing and ultimately believe low fee is best, I continue to monitor these and have not been compelled to dump them yet

Fidelity Contrafund
Fidelity low priced stock
Vanguard Wellington and Wellesley income
What applicable index do those funds have? I maintain that by definition a fund that is not an index fund does not have an applicable index. Anyone can compare the risk and return of one portfolio to that of another one which only proves that if an investor had chosen the one portfolio they would gotten the results of that portfolio and vice versa.
I fully appreciate that there is always difficulty determining what exactly is the best index to compare it to, and no one index will be an exact fit, by definition. However, for funds like contra, I look vs growth index and also vs S&P500 and it compares favorably to both. In recent years not by leaps and bounds, but small margins. It is possible that such funds have a higher risk profile, thus higher returns, but if you look at down markets, they did do worse than the broad market, and perhaps marginally better.

When you invest in an active fund it is under the belief that the fund manager can gain a positive risk reward relationship and possibly change composition over time to edge the indexes. Evidence shows a vast majority of them can't do that, but there could be a few that can. Of course, past performance doesn't predict future results.

To be clear, I am not advocating for active fund management, I am responding to OP question regarding potential funds that have beat index over long term.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by JBTX » Wed Mar 07, 2018 12:35 pm

MnD wrote:
Wed Mar 07, 2018 12:26 pm
I've owned Dodge and Cox Stock almost 30 years since 1990 and below is a full 30-year growth of 10K chart relative to the S&P 500 index total return. Also below is the total return chart for Dodge and Cox Income since inception 29.x years relative to the aggregate bond index. I was a "pioneer" (first day of issue May 1, 2001) shareholder of Dodge and Cox International Stock so lastly I've also thrown in a chart for that fund since inception (almost 18 years) relative to the MSCI ACWI (ex-US). I was also a pioneer investor in Dodge and Cox Global Bond, but it will be a few decades till I see how that pans out. :beer

Dodge and Cox Stock - 30 years
Image

Dodge and Cox Income - 29.x years
Image

Dodge and Cox International Stock - almost 17 years
Image

Look at dodge and cox over 10 years. It hasn't beat indexes.

I had Dodge and Cox for many years, but I dumped it something after 2008, because its value approach had it overweighted in the financial sector and it got killed in 2008. It does show the problem one can encounter when value investing. I just decided having a fund that would decide to hold a lot in the financial sector right before the greatest financial meltdown of 60 years clearly didn't have as much mojo as I thought.

Somewhat hypocritically, I still own Dodge and Cox International.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by rkhusky » Wed Mar 07, 2018 12:52 pm

JBTX wrote:
Wed Mar 07, 2018 12:35 pm
I had Dodge and Cox for many years, but I dumped it something after 2008, because its value approach had it overweighted in the financial sector and it got killed in 2008. It does show the problem one can encounter when value investing. I just decided having a fund that would decide to hold a lot in the financial sector right before the greatest financial meltdown of 60 years clearly didn't have as much mojo as I thought.
If you are going to collect the value premium, you have to stick with it through thick and thin.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by JBTX » Wed Mar 07, 2018 2:05 pm

rkhusky wrote:
Wed Mar 07, 2018 12:52 pm
JBTX wrote:
Wed Mar 07, 2018 12:35 pm
I had Dodge and Cox for many years, but I dumped it something after 2008, because its value approach had it overweighted in the financial sector and it got killed in 2008. It does show the problem one can encounter when value investing. I just decided having a fund that would decide to hold a lot in the financial sector right before the greatest financial meltdown of 60 years clearly didn't have as much mojo as I thought.
If you are going to collect the value premium, you have to stick with it through thick and thin.
I understand and am not saying it is a bad fund. And I am certainly not against value. However my goal is to get rid of any funds and go to indexes if I don’t see how they help me on a risk and return basis. I may have bailed too early on the fund but was a bit turned off by their overweighting of financials. If you are going to make risky bets you better be right most of the time. Otherwise I could just go with a value index.

Being a value fund is hard. I had the clipper fund years ago and they were very contrarian but had a good track record on a risk/return basis. But then they made some big bets on companies like Tyco and Fannie and Freddie Mac that turned out badly. They got so discouraged they left the fund to some other notable value manager and he could never do anything with it either.

All of this leads to the conclusion that betting on active funds is generally a fools errand, but for those active positions i had I’m sticking with them as long as they seem to compare well with whatever index seems most applicable.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by rkhusky » Wed Mar 07, 2018 2:11 pm

JBTX wrote:
Wed Mar 07, 2018 2:05 pm
All of this leads to the conclusion that betting on active funds is generally a fools errand, but for those active positions i had I’m sticking with them as long as they seem to compare well with whatever index seems most applicable.
How long will you wait after they start under-performing to dump them? Predicting which active fund will out-perform an index is probably as hard as market timing because the returns don't have nice smooth increases and decreases - there are lots of bumps and valleys on the way.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by BigMoneyNoWhammies » Wed Mar 07, 2018 2:34 pm

goblue100 wrote:
Wed Mar 07, 2018 8:48 am
Longdog wrote:
Wed Mar 07, 2018 8:06 am
Without doing the research, and with the caveat that it most likely hasn't beaten its index regularly for years, Fidelity Magellan, in its heyday and under the management of Peter Lynch, very likely did beat its index for a decade or more in the 80s/90s. Since this is your research project, not mine :happy, I offer it only as a fund for you to investigate. It certainly was a noteworthy fund. I will be curious whether you find it meets your criteria.
I don't think Magellan has beaten its index the last 10. Fidelity Contrafund is a candidate, its inception date is 1967 and its life time return rate is 12.67% annualized. According to this calculator:
https://dqydj.com/sp-500-return-calculator/

The S&P 500 returned 10.137% from 2/1967 to 12/2017.
From 1977-1990 under Peter Lynch's management, the fund returned an average of roughly 29% annually and was the best performing fund in the world, with AUM going from something like $18 million in 1977 to $14 BILLION in 1990. This kind of long term success is very rare, and the fund has obviously not kept up that performance in recent years, but did have outsized success prior to Lynch coming on board in multiple years. I'd imagine this kind of performance is difficult even for someone with Peter Lynch's investment acumen over an extended period of time: markets and industries change, regulatory environments are altered over time, etc. The playing field never stays the same long enough for any strategy to always work, and sooner or later copy cats emerge to attempt to mimic and truly successful strategies.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by JBTX » Wed Mar 07, 2018 3:23 pm

rkhusky wrote:
Wed Mar 07, 2018 2:11 pm
JBTX wrote:
Wed Mar 07, 2018 2:05 pm
All of this leads to the conclusion that betting on active funds is generally a fools errand, but for those active positions i had I’m sticking with them as long as they seem to compare well with whatever index seems most applicable.
How long will you wait after they start under-performing to dump them? Predicting which active fund will out-perform an index is probably as hard as market timing because the returns don't have nice smooth increases and decreases - there are lots of bumps and valleys on the way.
I don’t know. Judgement call. I actually have reduced the relative stakes of contra and low price
Stocks even though there is nothing in their performance that indicated I needed to. There’s also the f a ct that right now plowing more funds into the S&P 500 is just not very satisfying either.

In terms of Wellington, Wellesley income and vanguard dividend growth, they all are very low fees and are part of my goal to hedge my downside risk a bit.

A couple of others I have that are “on the bubble”

FPA CRESCENT - kind of a blend fund that minimizes risk while capturing most of the return. Seems to fare better in downturns. It has 1.0% fee which is high but the fee is actually lower than it was. Is it any better than a 60/40 index, or Wellington or maybe life strategy conservative growth? Debateable.

Tweedy Brown global value - I really like the philosophy of the fund and its performance has been consistent but the fees have just gotten too high at about 1.3%. I’ll probably reduce stake or dump it. It is hard to benchmark because it is global Including US and hedges currency risk.

Ultimately my goal is to move towards index, lifestyle and target funds, but my path is not linear. As I’ve said elsewhere best I can tell my years of tinkering have probably been a push long term. Most the the active funds I am/was in compared favorably to the most applicable index.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by MnD » Wed Mar 07, 2018 3:45 pm

JBTX wrote:
Wed Mar 07, 2018 12:35 pm
Look at dodge and cox over 10 years. It hasn't beat indexes.
Dodge and Cox Income (DODIX) and International Stock (DODFX) have also outperformed the total bond aggregate and MSCI ACWI ex-US indices respectively for the past 10 years, in addition to the longer term out-performance I showed earlier. Here's the 10-year growth of $10K data
DODIX: $16,146.48 BBgBarc US Agg Bond TR $14,439.16
DODFX: $15,529.64 MSCI ACWI Ex USA NR: $13,109.87


Dodge and Cox Stock DODGX (a large cap value fund) has slightly lagged the S&P 500 index for the past 10 years but has slightly outperformed the Vanguard Value Fund (admiral shares) which tracks the CRSP large cap value stock index.
DODGX:$24,212.54 VVIAX:$23,648.97

So your blanket statement, " Look at dodge and cox over 10 years. It hasn't beat indexes", appears to be a materially false one.

Besides, basing investment decisions on the past 10-year performance is a great way to invest in whatever was hot in the most recent business cycle. I've been investing for 32 years now and if the joint life expectancy table in any guide at least one of us may have another 35 to go. Relative to a 67 year investing horizon, 10 years is kind of day-tradingesque. Some Dodge and Cox investors do have a tendency to pile in following periods of significant outperformance, and like you did "after 2008", tend to run off following periods of underperformance due to "mojo" concerns or whatever you call buy high sell low.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by dbr » Wed Mar 07, 2018 4:19 pm

dkturner wrote:
Wed Mar 07, 2018 11:55 am
oldcomputerguy wrote:
Wed Mar 07, 2018 10:38 am
dbr wrote:
Wed Mar 07, 2018 10:34 am
oldcomputerguy wrote:
Wed Mar 07, 2018 10:32 am
dkturner wrote:
Wed Mar 07, 2018 10:10 am
Vanguard changes the benchmark for the STAR fund when the composition of the STAR fund changes.
That being said, I have no idea how one would benchmark STAR against any other existing benchmark; coming up with a standard against which to measure an all-in-one fund like STAR is problematic. I think it's sort of like someone else said in this thread: how does one "benchmark" an actively-managed fund? It's a conundrum.

It isn't a conundrum. The question has a simple and logically correct answer, which is that you don't.
:beer
You’ve got to love it!

If an actively managed fund manager trails her benchmark knee jerk indexers love to point out she is a failure. But, if an actively managed fund manager exceeds her benchmark, knee jerk indexers claim it’s meaningless - because her benchmark can’t possibly be used to document the success of her performance.
That isn't me. I have no quarrel with some fund producing more return, or less risk, or some combination of the two and one of the funds being active and the other passive, not saying which was which. I am simply pointing out that the discussion has nothing to do with some index or some benchmark. You can always compare outcomes and decide whatever you want on the merits.

dbr
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Re: Looking for an example of a fund which has beat its index for 30 years

Post by dbr » Wed Mar 07, 2018 4:21 pm

dkturner wrote:
Wed Mar 07, 2018 11:36 am
dbr wrote:
Wed Mar 07, 2018 10:34 am
oldcomputerguy wrote:
Wed Mar 07, 2018 10:32 am
dkturner wrote:
Wed Mar 07, 2018 10:10 am
Vanguard changes the benchmark for the STAR fund when the composition of the STAR fund changes.
That being said, I have no idea how one would benchmark STAR against any other existing benchmark; coming up with a standard against which to measure an all-in-one fund like STAR is problematic. I think it's sort of like someone else said in this thread: how does one "benchmark" an actively-managed fund? It's a conundrum.

It isn't a conundrum. The question has a simple and logically correct answer, which is that you don't.
I don’t believe all of these mutual fund providers are selecting benchmarks for nefarious reasons. I think they come up with a benchmark because the SEC makes them select one. Maybe you should contact the SEC and point out that their regulations are causing fund managers to, deliberately or otherwise, mislead investors?

How would you suggest that an investor determine whether her mutual fund manager is doing a good job or a poor job?
If it is an index fund you look at the tracking error recognizing the impact of net expenses. If it is not an index fund you look at the risk and return and compare your estimate of performance to your objectives or to whatever alternative choices you might have in mind.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by JBTX » Wed Mar 07, 2018 4:25 pm

MnD wrote:
Wed Mar 07, 2018 3:45 pm
JBTX wrote:
Wed Mar 07, 2018 12:35 pm
Look at dodge and cox over 10 years. It hasn't beat indexes.
Dodge and Cox Income (DODIX) and International Stock (DODFX) have also outperformed the total bond aggregate and MSCI ACWI ex-US indices respectively for the past 10 years, in addition to the longer term out-performance I showed earlier. Here's the 10-year growth of $10K data
DODIX: $16,146.48 BBgBarc US Agg Bond TR $14,439.16
DODFX: $15,529.64 MSCI ACWI Ex USA NR: $13,109.87


Dodge and Cox Stock DODGX (a large cap value fund) has slightly lagged the S&P 500 index for the past 10 years but has slightly outperformed the Vanguard Value Fund (admiral shares) which tracks the CRSP large cap value stock index.
DODGX:$24,212.54 VVIAX:$23,648.97

So your blanket statement, " Look at dodge and cox over 10 years. It hasn't beat indexes", appears to be a materially false one.

Besides, basing investment decisions on the past 10-year performance is a great way to invest in whatever was hot in the most recent business cycle. I've been investing for 32 years now and if the joint life expectancy table in any guide at least one of us may have another 35 to go. Relative to a 67 year investing horizon, 10 years is kind of day-tradingesque. Some Dodge and Cox investors do have a tendency to pile in following periods of significant outperformance, and like you did "after 2008", tend to run off following periods of underperformance due to "mojo" concerns or whatever you call buy high sell low.
You seem to want to create your own self affirming narrative here that has nothing to do with what I actually posted and nothing to do with reality or the truth. You cherry picked one or two sentences and ignored the rest and created a buy high sell low boogey man to frown upon.


The reason I dumped dodge and cox is upon the realization that they had piled up in in more risky financial Stocks prior to the 2008 crash, and that changed my perception of really what they really were and decided that they didn’t do anything for me.

Also FYI, I’ve been investing as long as you have.

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Re: Looking for an example of a fund which has beat its index for 30 years

Post by MnD » Wed Mar 07, 2018 5:28 pm

JBTX wrote:
Wed Mar 07, 2018 4:25 pm
MnD wrote:
Wed Mar 07, 2018 3:45 pm
JBTX wrote:
Wed Mar 07, 2018 12:35 pm
Look at dodge and cox over 10 years. It hasn't beat indexes.
Dodge and Cox Income (DODIX) and International Stock (DODFX) have also outperformed the total bond aggregate and MSCI ACWI ex-US indices respectively for the past 10 years, in addition to the longer term out-performance I showed earlier. Here's the 10-year growth of $10K data
DODIX: $16,146.48 BBgBarc US Agg Bond TR $14,439.16
DODFX: $15,529.64 MSCI ACWI Ex USA NR: $13,109.87


Dodge and Cox Stock DODGX (a large cap value fund) has slightly lagged the S&P 500 index for the past 10 years but has slightly outperformed the Vanguard Value Fund (admiral shares) which tracks the CRSP large cap value stock index.
DODGX:$24,212.54 VVIAX:$23,648.97

So your blanket statement, " Look at dodge and cox over 10 years. It hasn't beat indexes", appears to be a materially false one.

Besides, basing investment decisions on the past 10-year performance is a great way to invest in whatever was hot in the most recent business cycle. I've been investing for 32 years now and if the joint life expectancy table in any guide at least one of us may have another 35 to go. Relative to a 67 year investing horizon, 10 years is kind of day-tradingesque. Some Dodge and Cox investors do have a tendency to pile in following periods of significant outperformance, and like you did "after 2008", tend to run off following periods of underperformance due to "mojo" concerns or whatever you call buy high sell low.
You seem to want to create your own self affirming narrative here that has nothing to do with what I actually posted and nothing to do with reality or the truth. You cherry picked one or two sentences and ignored the rest and created a buy high sell low boogey man to frown upon.


The reason I dumped dodge and cox is upon the realization that they had piled up in in more risky financial Stocks prior to the 2008 crash, and that changed my perception of really what they really were and decided that they didn’t do anything for me.
Dodge and Cox investment committees are not a closest indexers. Their funds have substantially outperformed and underperformed common indices over various market cycles. The level of portfolio divergence in 2008/09 that hurt Dodge and Cox Stock then was an enormous benefit to Dodge and Cox Stock holders in 2000-02. Per answering the OP's question on 30-year out-performance, the core Dodge and Cox funds (stock, income, international stock) have clearly outperformed for 30 years or from inception and clearly for 10 years for Income and International Stock while Stock was mixed, slightly under S&P 500 and slightly better than a large cap value index which is the fund category. Its unfortunate that you sold Dodge and Cox Stock "after 2008" due to its lack of mojo, but that isn't a credible argument against the fund. Likewise with stating "Look at dodge and cox over 10 years. It hasn't beat indexes" when that statement is mostly false.

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