Ron Baron...How Does He Compare to Total Market?

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Leesbro63
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Joined: Mon Nov 08, 2010 4:36 pm

Ron Baron...How Does He Compare to Total Market?

Post by Leesbro63 »

I generally don't get too tuned into the financial dribble on CNBC but I was somewhat captivated by Ron Baron on today's CNBC early morning segment. He made me wonder if, instead of doing it the Boglehead way, maybe his way, something like that of Warren Buffett, isn't the better way.

In other words, be 100% equity all the time and ride the waves. Maybe even be 100% technology. The volatility will be way more severe than a 60/40 portfolio (where I've about been most of the last 25 years), but the overall end result will be so much further ahead that it's worth it.

I know he has a number of investment funds. Is there some way to compare him to Vanguard Total Market over the last 20 years? Or some sort of similar metric that would compare?
MikeG62
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Re: Ron Baron...How Does He Compare to Total Market?

Post by MikeG62 »

Leesbro63 wrote: Wed Oct 14, 2020 6:40 am I generally don't get too tuned into the financial dribble on CNBC but I was somewhat captivated by Ron Baron on today's CNBC early morning segment. He made me wonder if, instead of doing it the Boglehead way, maybe his way, something like that of Warren Buffett, isn't the better way.

In other words, be 100% equity all the time and ride the waves. Maybe even be 100% technology. The volatility will be way more severe than a 60/40 portfolio (where I've about been most of the last 25 years), but the overall end result will be so much further ahead that it's worth it.

I know he has a number of investment funds. Is there some way to compare him to Vanguard Total Market over the last 20 years? Or some sort of similar metric that would compare?
Sure, look at the long-term performance of his mutual funds versus their "appropriate benchmark". Be careful here as he doesn't always use the benchmark that most closely aligns with the investment philosophy of each fund. So you may need to use a different benchmark. I think what you will see is that over long periods of time the performance of his funds is not all that much different from the passive index that most closely aligns with the investment strategy of each fund. In many cases it's slight below.

This pdf contains the performance of his funds as of June 2020.

https://www.baronfunds.com/sites/defaul ... 0.20_0.pdf

Look at the performance table for each individual fund. For example, the first one begins on page 22 for the Baron Asset fund. This is a mid-cap growth fund and the performance over the last 10/15 years vs. the mid-cap growth benchmark is +27bps/+5bps. Keep in mind the performance of the fund excludes the impact of taxes on distributions (particularly CG distributions). As such, the after-tax performance of the fund (assuming one were to hold this fund in a taxable brokerage account) would likely lag the benchmark.

He also tends to take a lot of risk - holds very large positions in certain stocks within each portfolio. For example, I've been an investor in his Baron Partners fund since 2009. That one has done quite well. However, currently almost 36% of the entire portfolio is in Tesla stock! Since I am holding it in a taxable account and I've got significant capital gains, I'm kind of locked into leaving it alone unless I want to incur the tax consequences of selling it. That's the problem with actively managed funds in taxable accounts. If they do well, it's hard to move the money out (it's kind of like handcuff's). And also at some point the manager might leave or retire and then you are faced with a really tough decision. This risk does not exist with passively managed index based funds/ETF's.
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firebirdparts
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Re: Ron Baron...How Does He Compare to Total Market?

Post by firebirdparts »

I measure every investment against the S&P500, and I'm not planning to change. It seems reasonable to me to say "what if" I was 100% stocks all the time. When you're young, it's a reasonable thing to do. If you're retired, maybe not as reasonable. There are a few funds out there run by other people which are even more volatile than the S&P500. Whether they have higher returns depends on the dates you pick.

As you know, USA large caps have performed so well that it would be unwise to just believe they'll do it again right away. They might do it again, but it would be unwise to expect that ahead of time.
A fool and your money are soon partners
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