Fox Business - Bogleheads Guide to Retirement Planning

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thepro
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Re: Indexing vs. active

Post by thepro » Tue Nov 24, 2009 9:47 pm

Rodc wrote:
thepro wrote:What do I say to this person that has actually been buying these two funds, and MANY others on the recommendation of his adviser, for YEARS and YEARS. "It's not that simple" just doesn't hold water...for this adviser, he has actually been recommending adding money to these funds for over 14 years, and he's been right? What is one to do?
It is tough to be in that position.

Truth is if you index you will be ahead of most people by a modest amount, but none of those people will ever show you their portfolio returns. The only people who will bug you are the people who got lucky, or maybe they really have skill, how would you know? But they only crawl out after the fact, when they do poorly they stay hidden.

It is important to know that even a modest consistent advantage will get you a great advantage in the end as that advantage compounds over time. Index investing is not about the Big Score, but the steady application of a modest advantage.

Really too, this is not about Winning! It is about finding a way to achieve your goals with a reasonable amount of certainty. Investing is a steady Eddie game. If you accomplish that does it really matter that a few people did better than you did? You were not in a race so who cares? (yeah, easier said than done, we all want to win. :))

If fact this friend did not show you his full set of returns. He showed you some funds, his winning funds. Does he hold other funds too, but neglected to show them to you? This is a classic trick. Odds are if you ask, he has no idea what is total compound return is, he has only his impression that he is doing well. We all remember our great moves, we all think we are better than average drivers (and investors).

Also, while the S&P 500 was a stinker over the last 10 years, is that all you held? If you had small, value, international, bonds you likely did rather better overall than just that one fund.
Good questions but for now, all I asked about was the classic S&P 500 index fund and it's record--that's why he only showed me his funds that he feels compare to that fund. I will get into the rest of this tomorrow, however, all good stuff. I am getting the impression that active managers can deliver the big hit from time to time and dramatically effect the portfolio good and bad while indexing is simple steady eddy as you say.

thepro
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Post by thepro » Tue Nov 24, 2009 9:55 pm

dbr wrote:In any case VFINX is not a large growth fund as the style box is

29 29 28
5 5 4
0 0 0

ANCFX actually is more tilted to large growth.

WASAX is a world allocation fund which is not even remotely comparable to the S&P 500. It is an almost exclusively large growth allocation.

There is nothing wrong with investing in funds that one believes will deliver high returns over the investing period of interest, except, of course, that one's belief may be mistaken.

The pertinent question is to what degree should one believe a person who wants to appropriate for himself 5.75% of one's assets up front. It is entirely possible, even typical, that the salesman himself actually believes his recommendation is a good one.
Great points but in the end, it's about getting the return we all need, and it's different for all of us.

I will be considering these funds no matter what their category may be, they are simply too good to ignore, load or not. The real question is whether they can replicate that performance going forward.

I am not interested in a guarantee from this adviser or anyone, if I wanted a guarantee I'd be in CDs. I'm only in the market because I accept risk adn I'm getting the impression that there are very capable money guys out there that deserve some consideration, not a lot, but some. Thanks to everyone.

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Re: Indexing vs. active

Post by dbr » Tue Nov 24, 2009 9:57 pm

thepro wrote:
Good questions but for now, all I asked about was the classic S&P 500 index fund and it's record--that's why he only showed me his funds that he feels compare to that fund. I will get into the rest of this tomorrow, however, all good stuff. I am getting the impression that active managers can deliver the big hit from time to time and dramatically effect the portfolio good and bad while indexing is simple steady eddy as you say.
Well, WASAX for one, is not remotely comparable to S&P 500. WASAX scored by betting on commodities and emerging market, went to cash to dodge the 2008 decline, and is now largely bet on China. It comes down to deciding that one has faith in these particular managers continuing to be as astute in the future as they were over the last ten years. The evidence is that continued astuteness of this magnitude almost never happens, but it might.

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HomerJ
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Re: Indexing vs. active

Post by HomerJ » Tue Nov 24, 2009 9:57 pm

thepro wrote:I am getting the impression that active managers can deliver the big hit from time to time and dramatically effect the portfolio good and bad while indexing is simple steady eddy as you say.
I wouldn't disagree with that... There are always managers who beat the index every year, even for multiple years... The hard part is picking them BEFORE they prove themselves successful...

A good example is Peter Lynch...

Years 1-3, how in the world would you know he was any good? If you invested in his fund the first couple years, it was pure luck

Year 5 - He now has an excellent 5-year record, but so do another 50 fund managers... Picking him here still involves some luck, because of the other 50, 45 of them will do poorly the next 5 years..

Year 10 - He now stands at the top, He's beaten the market consistently for ten years straight... There's only a few other fund managers of his caliber.. It's obvious he's a star...

Year 12 - He retires... the Magellen fund, huge and bloated with a new manager underperforms for quite some time afterwards...

So year 1 pure luck...

Maybe picking him year 5 from all the noise could be possible with skill...

Picking him year 10 when it was obvious how good he was just meant you lost money...

Read that last sentence again... Picking the fund with the awesome 10-year performance numbers ended up losing you money...

This happens again and again... Very very few funds (any?) beat the market for 20,30,40 years straight...

Fund managers beat the market all the time, but the list is mostly different every single year... Very few can consistently beat the market, and it's even harder to PICK those winners before it's clear they are winners.
Last edited by HomerJ on Tue Nov 24, 2009 10:27 pm, edited 1 time in total.

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HomerJ
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Post by HomerJ » Tue Nov 24, 2009 10:00 pm

thepro wrote: I really thank all of you for the help here but a point I must make...Yes, he has been doing it 30 years, my buddy is personal friends with him and states categorically that he makes far more money on his investments than he has ever made in his advising business because he invests in what he recommends. He is the most low pressure guy from what I hear and does not work for the money. He has no interest in retiring because there is no stress in his job. As someone posted tonight...its about achieveing your goals and he has--he just isn't ready to go home and stare out a window, for what it's worth.
Sounds like a good guy... Does he waive the front load fees since he doesn't need the money anymore?

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Post by tarnation » Tue Nov 24, 2009 10:05 pm

rrosenkoetter wrote:Sounds like a good guy... Does he waive the front load fees since he doesn't need the money anymore?
Of course, he'll hook you up with the C share class. :lol:
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dbr
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Post by dbr » Tue Nov 24, 2009 10:06 pm

thepro wrote:
Great points but in the end, it's about getting the return we all need, and it's different for all of us.
On this point you are seriously mistaken. It is about getting the return we all need AND about what risk has to be taken to anticipate that return. You are looking at only one half of the equation.

Your evident misunderstanding of what is in these investments while attending only to what a salesman wants to show you for past return is not smart investing.

One would have no quarrel with investing in WASAX or ANCFX if vetted by a complete understanding of what you are buying, including a large bet on the future capability of the manager to continue to overcome costs and outperform a less risky alternative portfolio.

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Re: Bogleheads Indexing / Rick Ferri

Post by TJAJ9 » Wed Nov 25, 2009 2:39 am

thepro wrote:I'm an advocate of indexing and Ferri in general, however, today I was shown some data that was very troubling.

A friend that advocates the use of a professional investment adviser had me go to the "fund compare" section of CBS Marketwatch for a quick lesson. He had me enter (VFINX) the S&P Vanguard Flagship fund (large cap growth) and compare it to two others (ANCFX and WASAX). Both of these are also large cap growth, and charge a full 5.75% UP FRONT! However, both of these "loaded" funds literally trounced (VFINX) the index fund, over 1, 3, 5, 7 and 10 years! I didn't know how to react or what to say--I was taking Bogle and Ferri on their word that if you pay more for investments, you don't get more, however, it's precisely the opposite--when you pay more, you actually get more!

He also reminded me that the returns I was viewing were NET or after fees are taken away--I have since verified that to be true. What am I to believe? I am seriously doubting this low cost, indexing approach after a friend showed me two funds that not only beat indexes occasionally but over an ENTIRE DECADE! Please help.
You're comparing apples to oranges. VFINX strictly covers the S&P 500 only.

ANCFX:
The fund invests primarily in common stocks or securities convertible into common stocks and may invest significantly in securities of issuers domiciled outside the United States and Canada and not included in the Standard & Poor's 500 Composite index. It may also hold cash or money market instruments.


WASAX:
The fund seeks to achieve its objective by allocating its assets among primarily stocks, bonds and short-term instruments of issuers located around the world. It may invest in domestic and foreign securities; the fund may invest up to 100% of assets in foreign securities. It may buy or sell options or futures contracts on a security or an index of securities, or enter into swaps.
Since we're comparing apples to oranges, here's something for you: Vanguard's low cost Total Bond Market Index Fund (VBMFX) crushed ANCFX over the past 10 years.

Here's the growth of $10,000 over the past 10 years:

VBMFX: $18,138
ANCFX: $14,918

Paying that adviser those big fees really helped there, eh?

One last question: which fund is going to outperform the market in the next 10 years? Good luck with that. :wink:

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Post by gkaplan » Wed Nov 25, 2009 8:02 am

Ask that adviser about Bill Miller.
Gordon

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Post by desertdug08 » Wed Nov 25, 2009 8:39 am

thepro,
If you have found an excellent advisor that you trust and has a proven track record then stick with him. Continue to carefully track your portfilio cost, return, risk etc. As you have guessed the basic Boglehead philosophy is that the majority of advisors do not and cannot consistantly match market returns let alone beat the market due to fees.
My personal experience with my former advisor was less than stellar so I am biased.

Cheers,

DUG

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Post by superthan34 » Wed Nov 25, 2009 8:51 am

It looks like the WASAX even sells some securities short, so even farther from what the SP 500 represents. I am not even sure what kind of index that would compare.

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Post by kyuss » Wed Nov 25, 2009 8:59 am

="thepro" I really thank all of you for the help here but a point I must make...Yes, he has been doing it 30 years, my buddy is personal friends with him and states categorically that he makes far more money on his investments than he has ever made in his advising business because he invests in what he recommends. He is the most low pressure guy from what I hear and does not work for the money. He has no interest in retiring because there is no stress in his job. As someone posted tonight...its about achieveing your goals and he has--he just isn't ready to go home and stare out a window, for what it's worth.
Keep in mind, the advisor gets to buy those funds load-waived for himself, he may have neglected to mention that to you.

I personally prefer index funds because I find it simpler to manage my equity/fixed income allocation, but using actively managed funds can be just fine also. But there is never a good reason to pay a sales load. Any fund that has a sales load can be matched by some other fund without one, just do a little more research and save yourself 5.75% of your investment.

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Post by Cloud » Wed Nov 25, 2009 9:04 am

WASAX holds over 16% of it's assets in Gold Bullion... It's beyond ridiculous for any advisor to compare it to the S&P 500...

Advisors will always find loaded funds that have outperformed the S&P 500 in the past to try and sell you... That's their game and how they make their money. Ask him to pick a winning fund today and let's come back in 10 years to see how it did..

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Cloud
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Post by Cloud » Wed Nov 25, 2009 9:09 am

Anyway... If anyone finds The FOX video online please post it.

Thanks,

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Re: Bogleheads Indexing / Rick Ferri

Post by Rick Ferri » Wed Nov 25, 2009 9:28 am

thepro wrote:I'm an advocate of indexing and Ferri in general, however, today I was shown some data that was very troubling. A friend that advocates the use of a professional investment adviser had me go to the "fund compare" section of CBS Marketwatch for a quick lesson. He had me enter (VFINX) the S&P Vanguard Flagship fund (large cap growth) and compare it to two others (ANCFX and WASAX). Both of these are also large cap growth, and charge a full 5.75% UP FRONT! However, both of these "loaded" funds literally trounced (VFINX) the index fund, over 1, 3, 5, 7 and 10 years!
There will always be a small percent of surviving mutual funds in the core large cap US category that beat the market over any decade. No one is arguing this point. The problem is picking a winning fund in advance. Over 80 percent of investors use past performance, as your freind appears to be inplying. But ALL acedemci studies conclude that past outperformance is poor indicator of future outperformance. Less than 20 percent of past outperforming funds are able to repeat.

Here are three facts:

Fact #1 About 25 percent of surviving mutual funds outperform their index fund rival over any decade.
Fact #2 The average outperformance of those funds was 0.6 percent and the average underperformance of the rest was negative 1.6 percent.
Fact #3 Less than 20 percent of the outperforming funds continued their outperformance over the next decade.

These facts bring us to two crucial questions:

1) For your retirement money, will you bet that you can pick active funds that will beat the market, or do you take an index return?

2) What would you recommend that your parents do?

Ironically, people who select active management in question 1 will more often than not pick index funds in question 2. In other words, they think they have the skill to pick active managers, but they do not think their parents can do it; and since they want to recommend the safest route for their parents money, they recommend index funds.

This phenomenon is called ‘overconfidence’ in the behavioral finance arena. People who think they have the skill to pick active managers in the future are overconfident in their investment ability, and that hurts their ability to earn index returns in the long-term.

Active investors often confuse possibility with probability. There is always the possibility that they will pick a winning active fund, but the probability is low. Billboards that advertise Mega-Million lottery jackpots attract people who buy tickets based on the possibility of winning, not the probability.

Rick Ferri

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Re: Bogleheads Indexing / Rick Ferri

Post by Mel Lindauer » Wed Nov 25, 2009 9:28 am

TJAJ9 wrote: Since we're comparing apples to oranges, here's something for you: Vanguard's low cost Total Bond Market Index Fund (VBMFX) crushed ANCFX over the past 10 years.

Here's the growth of $10,000 over the past 10 years:

VBMFX: $18,138
ANCFX: $14,918

Paying that adviser those big fees really helped there, eh?
Yes, you can find some real zingers when you compare apples and oranges, can't you?

And Total Bond Market Index Fund outperformed ANCFX with a whole lot less risk. Simply amazing what's available without a load, isn't it? :D
Best Regards - Mel | | Semper Fi

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Re: Bogleheads Indexing / Rick Ferri

Post by thepro » Wed Nov 25, 2009 11:33 am

Rick Ferri wrote:
thepro wrote:I'm an advocate of indexing and Ferri in general, however, today I was shown some data that was very troubling. A friend that advocates the use of a professional investment adviser had me go to the "fund compare" section of CBS Marketwatch for a quick lesson. He had me enter (VFINX) the S&P Vanguard Flagship fund (large cap growth) and compare it to two others (ANCFX and WASAX). Both of these are also large cap growth, and charge a full 5.75% UP FRONT! However, both of these "loaded" funds literally trounced (VFINX) the index fund, over 1, 3, 5, 7 and 10 years!
There will always be a small percent of surviving mutual funds in the core large cap US category that beat the market over any decade. No one is arguing this point. The problem is picking a winning fund in advance. Over 80 percent of investors use past performance, as your freind appears to be inplying. But ALL acedemci studies conclude that past outperformance is poor indicator of future outperformance. Less than 20 percent of past outperforming funds are able to repeat.

Here are three facts:

Fact #1 About 25 percent of surviving mutual funds outperform their index fund rival over any decade.
Fact #2 The average outperformance of those funds was 0.6 percent and the average underperformance of the rest was negative 1.6 percent.
Fact #3 Less than 20 percent of the outperforming funds continued their outperformance over the next decade.

These facts bring us to two crucial questions:

1) For your retirement money, will you bet that you can pick active funds that will beat the market, or do you take an index return?

2) What would you recommend that your parents do?

Ironically, people who select active management in question 1 will more often than not pick index funds in question 2. In other words, they think they have the skill to pick active managers, but they do not think their parents can do it; and since they want to recommend the safest route for their parents money, they recommend index funds.

This phenomenon is called ‘overconfidence’ in the behavioral finance arena. People who think they have the skill to pick active managers in the future are overconfident in their investment ability, and that hurts their ability to earn index returns in the long-term.

Active investors often confuse possibility with probability. There is always the possibility that they will pick a winning active fund, but the probability is low. Billboards that advertise Mega-Million lottery jackpots attract people who buy tickets based on the possibility of winning, not the probability.

Rick Ferri
1) yes, I am giving him a decade with some of my money to earn better than index returns

2) I would advocate my parents split things up in the same manner.

The adviser said "wealthy people are not snowed or having the wool pulled over their eyes as some would suggest. They are discriminating buyers of everything in their life, investments included." It seems to keep getting back to the same conclusion, there is more than one way to skin a cat.

The way it's been shown to me, this guy went down LESS than the market last year, is up MORE than the market this year--this can't be dismissed...he navigated the worst market since the great depression to save his clients money, and is up MORE in one the largest rallies in decades as well. The question is whether he can do another decade and for some money, I am willing to bet he will, after fees.

Thanks.

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Re: Bogleheads Indexing / Rick Ferri

Post by madsinger » Wed Nov 25, 2009 11:47 am

thepro wrote:The question is whether he can do another decade and for some money, I am willing to bet he will, after fees.
You seem to understand that you are "taking a bet" that this adviser will beat the market after fees over the next ten years. Since you understand that this is not a "sure thing", and that you may underperform, but are willing to take that chance, I say "Good Luck", and let us know how it came out!

For me, I'm not willing to "make that bet", but that is my decision, not yours.

-Brad.

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Re: Bogleheads Indexing / Rick Ferri

Post by unclemick » Wed Nov 25, 2009 11:52 am

thepro wrote:I'm an advocate of indexing and Ferri in general, however, today I was shown some data that was very troubling.

A friend that advocates the use of a professional investment adviser had me go to the "fund compare" section of CBS Marketwatch for a quick lesson. He had me enter (VFINX) the S&P Vanguard Flagship fund (large cap growth) and compare it to two others (ANCFX and WASAX). Both of these are also large cap growth, and charge a full 5.75% UP FRONT! However, both of these "loaded" funds literally trounced (VFINX) the index fund, over 1, 3, 5, 7 and 10 years! I didn't know how to react or what to say--I was taking Bogle and Ferri on their word that if you pay more for investments, you don't get more, however, it's precisely the opposite--when you pay more, you actually get more!

He also reminded me that the returns I was viewing were NET or after fees are taken away--I have since verified that to be true. What am I to believe? I am seriously doubting this low cost, indexing approach after a friend showed me two funds that not only beat indexes occasionally but over an ENTIRE DECADE! Please help.
Wow! I thought those guys became extinct in the 1960's.

:lol: :lol: :lol: :lol: :lol: :lol: :lol:

heh heh heh - maybe we have a time warp going on this forum. :wink:
I looked in the mirror - nope I'm not getting any younger. :roll: :lol:

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Post by jlq39 » Wed Nov 25, 2009 12:27 pm

I think thepro fails to realize that the adviser makes money every time whether his clients do or not. And he gets a nice chunk upfront as well. Hmm, someone comes through his door with let's say $100k to invest. The adviser will get 5.75% upfront, plus say 1.5% per year. Do you not think he'll spin the numbers any way he can in favor of active investing and particular his own skills to get your money? So that first year he'll pocket oh say...$5,750 in up front sales load, plus another whatever his kickback is from the 1.5% expense ratio. Not bad for a days (actually less) work. So, your already in the hole to start and would have to earn a return that outperforms the "index" by almost 6%. Not to mention that even if you did that, another 1.5% of assets will be lumped off from the expense ratio (and possibly some other fees that are not even calculated into the expense ratio). So , you'd have to outperform the index by another couple percent. So, all in all, your talking about outperforming the index by at least 8%+ that first year alone just to break even. Meanwhile, the adviser was fat and happy from day one when he took your sales load, and basically, gets a nice kickback every year for helping you play a losing game. To me, the only real winner I see here is the adviser. If you can not see that, then your not going to understand the Boglehead philosophy to begin with. I suggest you educate yourself by reading some of the Boglehead's recommended books and read this forum often. There is so much value here for FREE. Take advantage of it.

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Re: Bogleheads Indexing / Rick Ferri

Post by Kenster1 » Wed Nov 25, 2009 12:42 pm

TJAJ9 wrote: Here's the growth of $10,000 over the past 10 years:

VBMFX: $18,138
ANCFX: $14,918
Then there's also Vanguard's conservative Wellesley Fund:
VWINX: $19,359

Also there's been discussion here about whether returns include load fees or not but that doesn't really matter because American Funds literature will show returns AFTER SALES CHARGE. So it's easy to go straight to the source if you're not sure whether the returns you're looking at includes the load fees or not. I *believe* that when you look at the returns on Vanguard's website for Load funds that it includes the load fees.

By the way I wonder why ANCFX was picked 10+ years ago? From the American Funds family - I would've picked American Funds Growth Fund of America or American Funds Capital World Growth & Income fund or a combo of both.

With respect to WASAX -- Ivy Asset Strategy Fund - this has been a hot fund and gaining quite a bit of attention. But note that as others have mentioned - this fund cannot be compared to the S&P500 as WASAX is a World Allocation Fund. If you want it as part of your portfolio for a "go-anywhere, invest in anything" play then ok but just be careful about allocating too much and ensure that you know what you're getting into. There have been way way too many stories out there....

See this story I posted:
http://www.bogleheads.org/forum/viewtop ... ht=screwed

This lady trusted her broker whom she knew for a long time -- I believe it was for 30 years...and she got screwed over but then turned the tables around and won in a lawsuit but that's not the case for everyone. You must do your own due diligence as well to see what you're investing in.

Can you provide a write-up as to why you're comfortable with WASAX management? What do you know about them and how they invest? Did you know that WASAX has 40% of equity recently allocated to just China, Taiwan, India and South Korea? Are you comfortable with that?

Are you comfortable that as of 9/30/09 --- 67% of their bonds allocation was invested in "B" rated bonds --- again, that's a lower grade than BBB and BB bonds. Is that ok?

They make concentrated bold moves into various assets and while you may like that -- just keep in mind and be aware of what you're investing in because a lot of people who did well in the 90's got crushed in the 2000-2002 bear market. And then there were those who did well in the 2000-2004 time-frame but got crushed in 2008.

Another World Allocation that has done well the past 10+ years is MALOX -- Blackrock Global Allocation fund, which isn't quite as electic and bold as WASAX but the key for MALOX was actually disciplined and balanced diversification across Global stocks & bonds. MALOX has around 800 holdings.

The other alternative is look at is a globally value tilted index portfolio. Guys like Robert T has talked about his Global Small & Value Tilted passive-index portfolio as well which also has crushed the S&P500 the past 5-7 years.
Last edited by Kenster1 on Wed Nov 25, 2009 2:33 pm, edited 1 time in total.
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Post by cinghiale » Wed Nov 25, 2009 1:03 pm

rrosenkotter wrote:
You can pick one box every year (reset and randomized each year) for the next 40 years, or I can just hand you $7500 each year... What's the smartest choice?
Actually, the $7500 number is conservative. Given the reality of survivorship bias, where poor performing funds are discontinued or melded with other, better performing ones, the "known" box would likely be closer to $8000 or $8500. Why? Beacuse the losers disappear and are not figured into calculations of relative fund performance.

So yes, over time some funds will have a "$10,000" track record over 10 years. But, time and time again, they never end up being the same funds to repeat as winners in the next time around.
"We don't see things as they are; we see them as we are." Anais Nin | | "Sometimes the first duty of intelligent men is the restatement of the obvious." George Orwell

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Post by FrugalInvestor » Wed Nov 25, 2009 1:45 pm

Is there a link available where I might watch Rick's interview?
Have a plan, stay the course, and simplify. And while you're at it, ignore the noise!

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Re: Bogleheads Indexing / Rick Ferri

Post by HomerJ » Wed Nov 25, 2009 2:40 pm

thepro wrote:The adviser said "wealthy people are not snowed or having the wool pulled over their eyes as some would suggest. They are discriminating buyers of everything in their life, investments included."
That's a pretty slick salesman move... like old Madoff himself... "Well, I only allow smart discriminating people invest with me..."

It's too bad you're not a discriminating buyer... Most of us here are.

You're actually taking advice from the guy who has vested self-interest in your decision.

You're asking the barber if you need a haircut, and when he says "Yes", you're thinking to yourself... "Well, he's the expert!"... (even though he will ALWAYS say "Yes").

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Re: Bogleheads Indexing / Rick Ferri

Post by HomerJ » Wed Nov 25, 2009 2:48 pm

thepro wrote:The way it's been shown to me, this guy went down LESS than the market last year, is up MORE than the market this year--this can't be dismissed...he navigated the worst market since the great depression to save his clients money, and is up MORE in one the largest rallies in decades as well. The question is whether he can do another decade and for some money, I am willing to bet he will, after fees.
As others have pointed out, you would have done a lot better over the last ten years (against at least one of the funds your advisor touted as being a great pick) in a total market bond index fund...

He's really not as smart as you think he is. He hasn't told you about any of his loser funds, and even the winning funds he's shown you aren't all that great.

I'm done with this thread... part of me wonders if "thepro" is a financial advisor just posting to show "proof" that financial advisors and load funds are worthwhile.

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Re: Bogleheads Indexing / Rick Ferri

Post by Lucio » Wed Nov 25, 2009 3:00 pm

delete
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Post by cinghiale » Wed Nov 25, 2009 3:03 pm

rrosenkrotter wrote:
part of me wonders if "thepro" is a financial advisor just posting to show "proof" that financial advisors and load funds are worthwhile.
Hmmmm.. 14 total posts and 12 of them have been on this thread. How do those numbers add up!?!
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Re: Bogleheads Indexing / Rick Ferri

Post by Lucio » Wed Nov 25, 2009 3:03 pm

rrosenkoetter wrote: I'm done with this thread... part of me wonders if "thepro" is a financial advisor just posting to show "proof" that financial advisors and load funds are worthwhile.
I agree. Watch out for touts.

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Re: American fund annual report

Post by m_j_paquette » Wed Nov 25, 2009 3:06 pm

bartgarcia wrote:Here is a link to an American fund...pg 2 has the disclaimer followed by performance on pg 3

https://www.americanfunds.com/pdf/mfgear-904_icaa.pdf
Yup. That's what I thought.

Fund results shown in this report, unless otherwise indicated, are for Class A shares at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. Results are for past periods and are not predictive of results for future periods.

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Re: Bogleheads Indexing / Rick Ferri

Post by thepro » Wed Nov 25, 2009 3:25 pm

I'm done with this thread... part of me wonders if "thepro" is a financial advisor just posting to show "proof" that financial advisors and load funds are worthwhile.
"thepro" is the middle of my last name, and one I use everywhere. Feel free to be done with this thread, I'm seeking those interested in helping me wortk through this crap. If these objections he's raising, and I'm raising here are too much, just ignore me, but thanks for what you did write.

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Post by cinghiale » Wed Nov 25, 2009 3:57 pm

thepro wrote:
"thepro" is the middle of my last name, and one I use everywhere. Feel free to be done with this thread, I'm seeking those interested in helping me wortk through this crap. If these objections he's raising, and I'm raising here are too much, just ignore me, but thanks for what you did write.
Sooooo... was there a "I'm not a shill or a tout or a salesman" in there somewhere?
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Post by HomerJ » Wed Nov 25, 2009 4:07 pm

tarnation wrote:
rrosenkoetter wrote:Sounds like a good guy... Does he waive the front load fees since he doesn't need the money anymore?
Of course, he'll hook you up with the C share class. :lol:
You know, before I became a Boglehead, I had an advisor who hooked me up with B or C class shares... I remember being upset about loads (I had read that much somewhere), so he said no problem, we'll put you in this other class of shares that has no load..

But he never explained that the expense ratio was 1% higher (he may have mentioned the 6 year surrender charge). So I ended up paying the extra load anyway.

I mean, the whole industry is rigged to STEAL from people. What's worse is I don't think this advisor was a crook or a moron... He was an tax accountant who also did investments, and I think he really and truly believed that "you get what you pay for".

A very nice guy who has no idea that his clients are losing tons of money because he doesn't really understand what he's doing....

It's really sad.

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Post by thepro » Wed Nov 25, 2009 4:34 pm

Sooooo... was there a "I'm not a shill or a tout or a salesman" in there somewhere?
My you two are a testy bunch, paranoid much? Again, feel free to simply not respond.

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Post by tarnation » Wed Nov 25, 2009 4:40 pm

rrosenkoetter wrote:
tarnation wrote:
rrosenkoetter wrote:Sounds like a good guy... Does he waive the front load fees since he doesn't need the money anymore?
Of course, he'll hook you up with the C share class. :lol:
You know, before I became a Boglehead, I had an advisor who hooked me up with B or C class shares... I remember being upset about loads (I had read that much somewhere), so he said no problem, we'll put you in this other class of shares that has no load..

But he never explained that the expense ratio was 1% higher (he may have mentioned the 6 year surrender charge). So I ended up paying the extra load anyway.

I mean, the whole industry is rigged to STEAL from people. What's worse is I don't think this advisor was a crook or a moron... He was an tax accountant who also did investments, and I think he really and truly believed that "you get what you pay for".

A very nice guy who has no idea that his clients are losing tons of money because he doesn't really understand what he's doing....

It's really sad.
I have seen before how nice "advisors" help (at Merrill Lynch).
http://www.bogleheads.org/forum/viewtopic.php?p=169820
One of my favorite holdings was SRRR. It seemed to be an ETN (unsecured debt) issued by ML and "sold" to (stuffed down the gullets of) ML customers. IIRC, there were fees on top of fees, fortunately the Bogleheads (billern in particular) found a way to unwind it.
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Post by Mel Lindauer » Wed Nov 25, 2009 4:51 pm

thepro wrote:
Sooooo... was there a "I'm not a shill or a tout or a salesman" in there somewhere?
My you two are a testy bunch, paranoid much? Again, feel free to simply not respond.
You could have responded with a simple and truthful "Yes" or "No", but you chose to be evasive in two consecutive answers to a rather straightforward and simple question. That raises still more questions about your reason for posting here.

I also notice that you failed to respond to the two posts that showed that the load fund you're touting was trounced by two low-risk Vanguard's funds -- Wellesley and Total Bond Market Index fund. I guess that kind of information doesn't fit your game plan, so you simply ignore it?

Finally, this thread which you've hijacked was about Rick's TV appearance, not about your beloved load funds.
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Post by thepro » Wed Nov 25, 2009 4:59 pm

Mel Lindauer wrote:
thepro wrote:
Sooooo... was there a "I'm not a shill or a tout or a salesman" in there somewhere?
My you two are a testy bunch, paranoid much? Again, feel free to simply not respond.
You could have responded with a simple and truthful "Yes" or "No", but you chose to be evasive in two consecutive answers to a rather straightforward and simple question. That raises still more questions about your reason for posting here.

I also notice that you failed to respond to the two posts that showed that the load fund you're touting was trounced by two low-risk Vanguard's funds -- Wellesley and Total Bond Market Index fund. I guess that kind of information doesn't fit your game plan, so you simply ignore it?

Finally, this thread which you've hijacked was about Rick's TV appearance, not about your beloved load funds.

Mel, my young new blogger buddy, I didn't scrutinize your post and every individual word, sorry. I also am a bit new at this so if I missed any others, I will certainly look into them, not intentional.

Here it is, I'm in the legal profession, health care specifically, that's all you get and more than you need, ease your mind, relax. Second, I'm not touting anything, I'm commenting on what someone else was touting. Lastly, I don't have enough knowledge yet to comment on someone comparing a bond fund to a stock fund, doesn't sound logical to me.

Finally, if you're interested in Ferris video deal, ignore me, I had no idea how to get into this subject once in this "thread".

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Post by HomerJ » Wed Nov 25, 2009 5:05 pm

thepro wrote:Lastly, I don't have enough knowledge yet to comment on someone comparing a bond fund to a stock fund, doesn't sound logical to me.
It's a worthless comparison, but it's exactly as worthless as your honest and good-hearted advisor comparing WASAX to the S&P 500.

That's our point...

Your advisor is cherry-picking funds that did great and comparing apples to oranges. (There's a lot of fruit in that sentence!).

We're trying to help you... Re-read this thread... Quite a few people point out why investing with last decade's big winners rarely works out in the following decade. The people on this board are not poised to make a bunch of money off your decision... Who has more incentive to lie to you?

Your best bet is to do nothing, and educate yourself more, and then make a decision... Read "The Four Pillars of Investing" or any of the other good books on the book list on this site.
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Post by cinghiale » Wed Nov 25, 2009 5:05 pm

thepro wrote:My you two are a testy bunch, paranoid much? Again, feel free to simply not respond.
Actually, I'm considered by most to be a nice guy and I think you would enjoy my company. Responding the way I/we have is neither rooted in testiness nor paranoia. No one on this board wishes you ill and all stand ready to provide their best thinking on a topic.

But please, step back and consider...
1) There's a record of people who have picked up a username, jumped in, and posted comments and questions for the sole purpose of trolling for customers.
2) All of your posts have been on this one thread, and your first posting actually hijacked a topic more related to Rick Ferri's interview... an odd entry point for touting the stellar performance of some managed funds.
3) You seem more interested in proving the superiority of your identified "winner funds" than you do in thinking through the substantial evidence being offered in favor of low cost, index funds that capture the return of the entire market and avoid fund chasing, sector chasing, manager chasing, and style chasing.

So yes, some folks get suspicious.
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Post by Kenster1 » Wed Nov 25, 2009 5:25 pm

ThePro -- we're trying to be helpful as you opened up the conversation for opinions.

Firstly - you mentioned why compare a Bond fund to ANCFX?

Why not when you're comparing a World Allocation Fund to the S&P500?
WASAX has ample allocation to Emerging Markets - like 40% now and also invests in Gold as well as Bonds. That's been pointed out to you and I also noted that the Bonds they've been getting into are "B" rated Bonds.

So if you think you can compare WASAX to the S&P500 then we have every right to compare how the Wellesley Fund which is a stock/bond balanced fund trounced ANCFX over the past 10 years.

Do you feel me?
Last edited by Kenster1 on Wed Nov 25, 2009 5:42 pm, edited 1 time in total.
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Re: Indexing vs. active

Post by thepro » Wed Nov 25, 2009 5:27 pm

Ask the advisor for a written guarantee the loaded funds will equal or outperform their respective indexes. The advisor can make up the difference with their own money. Then sit back and wait for their response.
Check back with us after you make this proposal.

Here you go, this adviser emailed me directly...verbatum,

"Of course I will not offer any guarantee whatever related to a risk asset, the two concepts mentioned together is just silly. Whomever posed the question is playing with you, don't fall for it. What is vital to determine first is whether you wish to be a mindless sheep following the herd of a market index, or attempt to outperform the index (with no guarantees), up and down, over time. We do not believe in investing in things we have no control over but rather believe and have proof that we have been able to exploit market conditions through mispriced assets over time, and outperform the "index". Conner has provided you my audited returns. I have no idea whether we can do it again, however, I've been answering this question for my entire career and always answer it the same way. During that entire time, the results have always been the same--in life, in general, if you pay more you generally get more, it's not always about the cheapest way to do anything. With that, I suppose I can offer this, I guarantee that if you want an index fund, you will earn the return of said index minus management fees. We have index funds here too, it's just that no one we deal with has any interest in them, they want it done for them. I further guarantee that if the next decade for my active funds vs. the index funds plays out the same way, you will have earned 4000 basis points more/year than the index fund again, net of fees and that the concern of paying 0.79%/year plus a load in year one vs. 0.16% for a passive index fund, will never again see the light of day. You must decide if you wish to employ a professional's attempt to find, keep or sell mispriced assets over time for the attempt of material gain or loss. If so, our record proves you will have more money than the herd."

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Re: Indexing vs. active

Post by kyuss » Wed Nov 25, 2009 5:35 pm

thepro wrote: Here you go, this adviser emailed me directly...verbatum,

"Of course I will not offer any guarantee whatever related to a risk asset, the two concepts mentioned together is just silly. Whomever posed the question is playing with you, don't fall for it. What is vital to determine first is whether you wish to be a mindless sheep following the herd of a market index, or attempt to outperform the index (with no guarantees), up and down, over time. We do not believe in investing in things we have no control over but rather believe and have proof that we have been able to exploit market conditions through mispriced assets over time, and outperform the "index". Conner has provided you my audited returns. I have no idea whether we can do it again, however, I've been answering this question for my entire career and always answer it the same way. During that entire time, the results have always been the same--in life, in general, if you pay more you generally get more, it's not always about the cheapest way to do anything. With that, I suppose I can offer this, I guarantee that if you want an index fund, you will earn the return of said index minus management fees. We have index funds here too, it's just that no one we deal with has any interest in them, they want it done for them. I further guarantee that if the next decade for my active funds vs. the index funds plays out the same way, you will have earned 4000 basis points more/year than the index fund again, net of fees and that the concern of paying 0.79%/year plus a load in year one vs. 0.16% for a passive index fund, will never again see the light of day. You must decide if you wish to employ a professional's attempt to find, keep or sell mispriced assets over time for the attempt of material gain or loss. If so, our record proves you will have more money than the herd."
Has this advisor asked you about your risk tolerance or what you think you will need in retirement? Has he talked about levels of risk associated with different asset classes? If not, he is not actually "advising" you on anything and is only looking for your money. If he is truly interested in helping you invest for your future, he would be having those types of discussions well before he starts talking about specific funds.

It's all about risk.

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Re: Indexing vs. active

Post by thepro » Wed Nov 25, 2009 5:39 pm

kyuss wrote:
thepro wrote: Here you go, this adviser emailed me directly...verbatum,

"Of course I will not offer any guarantee whatever related to a risk asset, the two concepts mentioned together is just silly. Whomever posed the question is playing with you, don't fall for it. What is vital to determine first is whether you wish to be a mindless sheep following the herd of a market index, or attempt to outperform the index (with no guarantees), up and down, over time. We do not believe in investing in things we have no control over but rather believe and have proof that we have been able to exploit market conditions through mispriced assets over time, and outperform the "index". Conner has provided you my audited returns. I have no idea whether we can do it again, however, I've been answering this question for my entire career and always answer it the same way. During that entire time, the results have always been the same--in life, in general, if you pay more you generally get more, it's not always about the cheapest way to do anything. With that, I suppose I can offer this, I guarantee that if you want an index fund, you will earn the return of said index minus management fees. We have index funds here too, it's just that no one we deal with has any interest in them, they want it done for them. I further guarantee that if the next decade for my active funds vs. the index funds plays out the same way, you will have earned 4000 basis points more/year than the index fund again, net of fees and that the concern of paying 0.79%/year plus a load in year one vs. 0.16% for a passive index fund, will never again see the light of day. You must decide if you wish to employ a professional's attempt to find, keep or sell mispriced assets over time for the attempt of material gain or loss. If so, our record proves you will have more money than the herd."
Has this advisor asked you about your risk tolerance or what you think you will need in retirement? Has he talked about levels of risk associated with different asset classes? If not, he is not actually "advising" you on anything and is only looking for your money. If he is truly interested in helping you invest for your future, he would be having those types of discussions well before he starts talking about specific funds.

It's all about risk.
We're meeting next week for an interview. Despite the paranoia from some, I am still skeptical and will be on heightened alert next week. We'll see how it goes. Thanks to everyone, happy holidays.

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Re: Indexing vs. active

Post by Alex Frakt » Wed Nov 25, 2009 5:42 pm

thepro wrote:Ask the advisor for a written guarantee the loaded funds will equal or outperform their respective indexes. The advisor can make up the difference with their own money. Then sit back and wait for their response.
Check back with us after you make this proposal.


Here you go, this adviser emailed me directly...verbatum,

"Of course I will not offer any guarantee whatever related to a risk asset, the two concepts mentioned together is just silly. Whomever posed the question is playing with you, don't fall for it. What is vital to determine first is whether you wish to be a mindless sheep following the herd of a market index, or attempt to outperform the index (with no guarantees), up and down, over time. We do not believe in investing in things we have no control over but rather believe and have proof that we have been able to exploit market conditions through mispriced assets over time, and outperform the "index". Conner has provided you my audited returns. I have no idea whether we can do it again, however, I've been answering this question for my entire career and always answer it the same way. During that entire time, the results have always been the same--in life, in general, if you pay more you generally get more, it's not always about the cheapest way to do anything. With that, I suppose I can offer this, I guarantee that if you want an index fund, you will earn the return of said index minus management fees. We have index funds here too, it's just that no one we deal with has any interest in them, they want it done for them. I further guarantee that if the next decade for my active funds vs. the index funds plays out the same way, you will have earned 4000 basis points more/year than the index fund again, net of fees and that the concern of paying 0.79%/year plus a load in year one vs. 0.16% for a passive index fund, will never again see the light of day. You must decide if you wish to employ a professional's attempt to find, keep or sell mispriced assets over time for the attempt of material gain or loss. If so, our record proves you will have more money than the herd."
There is so much wrong with this. But I will point out just one thing for now. "4000 basis points more/year than the index fund" is simply laughable. That's 40% per year. Is your advisor the richest man in the world, because that's about 15 times better than the margin Warren Buffet has beat the US total market over his career.

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Post by Adrian Nenu » Wed Nov 25, 2009 5:45 pm

I further guarantee that if the next decade for my active funds vs. the index funds plays out the same way, you will have earned 4000 basis points more/year than the index fund again, net of fees and that the concern of paying 0.79%/year plus a load in year one vs. 0.16% for a passive index fund, will never again see the light of day.
This statement is illegal - he cannot make these outperformance promises for the future.

Furthermore, he doesn't even know what a basis point is. 100 basis points = 1%.

As it stands, his statement claiming to have earned 40% more per year than index fund's annual average over 10 years is absurd.

How can anyone hand over their money to this guy?! :P

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Post by thepro » Wed Nov 25, 2009 6:01 pm

Adrian Nenu wrote:
I further guarantee that if the next decade for my active funds vs. the index funds plays out the same way, you will have earned 4000 basis points more/year than the index fund again, net of fees and that the concern of paying 0.79%/year plus a load in year one vs. 0.16% for a passive index fund, will never again see the light of day.
This statement is illegal - he cannot make these outperformance promises for the future.

Furthermore, he doesn't even know what a basis point is. 100 basis points = 1%.

As it stands, his statement claiming to have earned 40% more per year than index fund's annual average over 10 years is absurd.
I blew it, he wrote 400 basis points, sorry. On the other point, I'll ask.

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Post by Chuck » Wed Nov 25, 2009 6:12 pm

Adrian Nenu wrote:This statement is illegal - he cannot make these outperformance promises for the future.
I agree these are the words of a scam artist. Especially the "that's what smart people do" and "don't be a sheep." Logic isn't working, so try empty appeals to ego.

Adrian, I think you're wrong about his "promise." He literally said "I guarantee that if my funds perform well, you will make lots of money." That's not a guarantee of future performance, it's a vapid tautology. That's like saying "If you die tomorrow, you'll be dead." (Of course it's meant to sound like a guarantee of what you think he said, which is just as bad.)

thepro, please listen to the wise folks in this forum that are trying to help you. This advisor will take a lot of money from you, and you won't realize it until years after it's too late. The posters on this forum have nothing to gain but peace on earth and goodwill toward men, and your friend stands to gain much of your lifetime's wealth.

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Re: Indexing vs. active

Post by m_j_paquette » Wed Nov 25, 2009 6:39 pm

I love the sales process, as an outside observer.
thepro's advisor wrote: "Of course I will not offer any guarantee whatever related to a risk asset, the two concepts mentioned together is just silly. Whomever posed the question is playing with you, don't fall for it. What is vital to determine first is whether you wish to be a mindless sheep following the herd of a market index, or attempt to outperform the index (with no guarantees), up and down, over time.
This bit is what I call the testosterone appeal. "Be a mindless sheep following the herd, or roll with me (but no guarantees)" Best to ignore this sort of emotional appeal.
thepro's advisor wrote: We do not believe in investing in things we have no control over but rather believe and have proof that we have been able to exploit market conditions through mispriced assets over time, and outperform the "index".
The Arithmetic of Active Management
By William F. Sharpe
Summary:The average actively managed dollar must underperform the average passively managed dollar, net of costs. Empirical analyses that appear to refute this principle are guilty of improper measurement.
thepro's advisor wrote: Conner has provided you my audited returns. I have no idea whether we can do it again...
OK, he's given you the legal caution, and paraphrased "past performance is not indicative of future returns", so he's off the hook.
thepro's advisor wrote: ...however, I've been answering this question for my entire career and always answer it the same way. During that entire time, the results have always been the same--in life, in general, if you pay more you generally get more, it's not always about the cheapest way to do anything. With that, I suppose I can offer this, I guarantee that if you want an index fund, you will earn the return of said index minus management fees. We have index funds here too, it's just that no one we deal with has any interest in them, they want it done for them.
Sales pitch, and a subtle emotional justification for higher fees.
thepro's advisor wrote: I further guarantee that if the next decade for my active funds vs. the index funds plays out the same way, you will have earned 4000 basis points more/year than the index fund again, net of fees and that the concern of paying 0.79%/year plus a load in year one vs. 0.16% for a passive index fund, will never again see the light of day.
That is a big honking IF to put between 'guarantee' and some really shiny sounding numbers. Beware. Past performance is not indicative of future returns.
thepro's advisor wrote: You must decide if you wish to employ a professional's attempt to find, keep or sell mispriced assets over time for the attempt of material gain or loss. If so, our record proves you will have more money than the herd."
Oopsie. His record proves you will have more money? Did he just say that his past performance IS indicative of future returns? He surely implied it. This is the clearest indicator I've seen yet that this is purely a shark attack.

Be careful. There is NOTHING preventing you from taking your business elsewhere.

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Re: Indexing vs. active

Post by kyuss » Wed Nov 25, 2009 7:10 pm

thepro wrote: We're meeting next week for an interview. Despite the paranoia from some, I am still skeptical and will be on heightened alert next week. We'll see how it goes. Thanks to everyone, happy holidays.
Good, be skeptical. If all you are getting from the advisor is access to actively managed funds that can beat the SP500, you don't need to pay extra for that, you can find those on your own using a simple screening tool on Morningstar or Yahoo, and then just go set up your own account at one of the discount brokerages. There are many low cost balanced funds that have outperformed VFINX, you may be well-served to put your money in something like Vanguard Star for a while and learn more about mutual funds and your own risk tolerance and potential retirement needs.

It doesn't have to be about indexing versus active, but in my opinion paying a sales load really is the same thing as throwing your money away.

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Post by tarnation » Wed Nov 25, 2009 8:30 pm

FrugalInvestor wrote:Is there a link available where I might watch Rick's interview?
I have it in mpeg. However, it is 2 hours and 1.4G and all my editing/authoring software is defunct now. Anyone here can trim/edit?
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Post by mlebuf » Wed Nov 25, 2009 9:01 pm

Sorry I'm late to the party.

Rick:

Great job on Fox Business. You represented the Bogleheads well and gave an excellent plug for the forum. Thank you.
Best wishes, | Michael | | Invest your time actively and your money passively.

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