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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75335  
Subject: Index Fund vs. Buying Individual Stocks Date: 11/22/2005 10:41 PM
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Most of the research I've read seems to indictate that no more than 20% of the people who buy individual stocks beat the S&P500. Imagine my surprise when I read this from Dr. Bernstein's "Efficient Frontier" web site.

The 15 Stock Diversification Myth

http://www.efficientfrontier.com/ef/900/15st.htm

In order to investigate this problem, I looked at the stocks constituting the S&P 500 as of 11/30/99, and formed 98 random equally-weighted 15-stock portfolios for the 12/89-11/99 10-year holding period. Below is a histogram of the annualized portfolio returns:

[see link above to view plot]

The "market return" (all 500 stocks held in equal proportion) was 24.15%. This is considerably higher than the 18.94% return of the actual S&P for two reasons: First, the S&P is a cap-weighted, not an equal-weighted, portfolio. Second, and much more important, many of the stocks in the S&P on 11/30/99 were not in the index at the beginning of the period. The recently-added stocks obviously had much higher returns than the companies they replaced, upwardly biasing the entire series of returns. Nonetheless, these flaws in the methodology do not change the basic conclusion; the TWD of these 15-stock portfolios is staggering—three-quarters of them failed to beat "the market." (Had the study been done with the S&P stocks extant on 12/1/99, it seems certain that the positive kurtoskewness of the present sample would have been replaced with a significant negative kurtoskewness—a much more important descriptor of risk. If anybody wants to give me a survivorship-bias-free S&P database for the past 10 years, my modem and mailbox are in fine working order.) Even so, the scatter of returns was quite high, with more than a few portfolios underperforming "the market" by 5%-10% per annum.

</snip>


Actually, Bernstein's plot doesn't show that "three-quarters of them failed to beat "the market"". Only 29 out of the 98 portfolios he examined failed to equal or beat the 18.94% annualized return for the S&P500 for the 10-year period. Fully 70% of the 15-stock portfolios beat the S&P500 10-year return of 18.94% per annum.

Of course, Bernstein picked his 15 stock portfolios at random while most investors think long and hard about what stocks to buy.

Perhaps "too much thinking" leads to underperformance.

intercst
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Author: billjam Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48337 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 12:24 AM
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I always bought into the "indexing is good" theory. And I still have 15% of my portfolio in Vanguard S&P 500 Index. But since January I've been running a small "real money" portfolio and a larger "paper" portfolio using Value Line. Both are up over 20%. I spend from two to four hours a week evaluating stocks which have moved up to either 1 or 2 in VL's timeliness rank. VL has identified many good stocks for me which I probably wouldn't have found otherwise.

This has been a year of learning to use VL properly, since I've always been a buy and hold investor. I learned a hard lesson a couple months in when I went on a trip without putting a stop loss on my VL holdings. I now use a 10% trailing stop loss. If I had done that from the beginning, my "real money" portfolio would be up over 35%.

I'll probably always have the majority of my portfolio in mutual funds and long term stocks, but I'm now convinced that with hard work and a disciplined strategy you can beat the market.

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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48338 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 12:40 AM
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Frankly, I don't think 10 month prove anything. Nor does the fact that I've lost money over the last 8 months in individual stocks.

I wish you the best of luck going forward, but give it more time before you reach any conclusions.

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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48343 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 8:44 AM
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98 random equally-weighted 15-stock portfolios for the 12/89-11/99 10-year holding period.

First, nobody with any sense would trade this way, either to pick the stocks randomly or to hold for 10 years. Second, a real trader would not limit himself to the S&P 500. Lots of other places to find good stocks.

So, while it is an interesting mathematical exercise, I don't see that this proves anything.

Beating the S&P is fairly easy if you have a good trading strategy. Beating the Nasdaq when it is in a good mood is more difficult. And over the last 3 years, beating the Russell 2000 has been hard, at least for me.


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Author: sazani Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48344 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 8:56 AM
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intercst writes:
Most of the research I've read seems to indictate that no more than 20% of the people who buy individual stocks beat the S&P500. Imagine my surprise when I read this from Dr. Bernstein's "Efficient Frontier" web site.

I'm not quite as surprised as you.

Jim O'Shaugnessy demonstrated an easy way to beat the SP500 with 10 individual stocks.

You buy the 10 largest cap stocks in the SP500 index in equal parts and hold them. You only sell when one of these stocks drops out of the top 10 and replace it with the stock that displaced it.

This is a very low brainer, low cost, low turnover, and thus, tax efficient way to invest.

There are many other ways of beating the SP500 index with SANE, low-cost, low-turnover mechanical investing methods.

Note: The Mechanical Investing board went insane years ago when the hyper-traders took over with their weekly screens and super concentrated portfolios. I stopped reading and posting there years ago. I don't recommend ANY of their screens that recommend trading more than every six months. The annual screens are much better IMHO.

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Author: sazani Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48346 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 9:21 AM
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joelxwil writes:
<snip>Beating the S&P is fairly easy if you have a good trading strategy. Beating the Nasdaq 
when it is in a good mood is more difficult. And over the last 3 years, beating the Russell 
2000 has been hard, at least for me.

The three year CAGR for my portfolio is 22.67% (as of close of market yesterday) compared to 
the R2000 index return of 23.33% (as of close of market yesterday).

HOWEVER, over the last 11 years:

Perform	Mine   SP500  Wil5000 Russ2000 NASDAQ
					
CAGR	19	13	12	12	17
GSD	26	19	19	17	36
Sharpe	0.58	0.47	0.42	0.47	0.36
TER	0.42	0.66	0.63	0.71	0.49

Note: CAGRs are net of expenses and rounded to the nearest whole number.  TERs include taxes.
 


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Author: valuefanRLA Big red star, 1000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48347 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 10:41 AM
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The three year CAGR for my portfolio is 22.67% (as of close of market yesterday) compared to
the R2000 index return of 23.33% (as of close of market yesterday).


Alright, I give...What is CAGR? And TER, too for that matter?

Thanks.
Ryan

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Author: jbking Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48349 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 10:49 AM
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Greetings Ryan,

Alright, I give...What is CAGR?

Compounded Annual Growth Rate. Or to use another term, annualized rate of return. So, a 10% CAGR over 3 years yields a 33.1% return as you have to compound the results.

And TER, too for that matter?

Either Test Effectiveness Ratio or Total Expense Ratio are my guesses.

Regards,
JB

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Author: Matt1344 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48350 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 10:53 AM
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"Alright, I give...What is CAGR? And TER, too for that matter?"

Hi Ryan,

I find several sites useful:

Investopedia http://www.investopedia.com/dictionary/ & And another: Investorwords http://www.investorwords.com/

http://www.acronymfinder.com/

http://www.investopedia.com/terms/c/cagr.asp

"Compound Annual Growth Rate - CAGR
What does it Mean? The year-over-year growth rate of an investment over a specified period of time.

The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered.

This can be written as follows: CAGR=((Beginning Value/Ending Value)^(1/# of years))-1


Investopedia Says... CAGR isn't the actual return in reality. It's an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate. You can think of CAGR as a way to smooth out the returns.

Don't worry if this concept is still fuzzy to you - CAGR is one of those terms best defined by example. Suppose you invested $10,000 in a portfolio on Jan 1, 2005. Let's say by Jan 1, 2006, your portfolio had grown to $13,000, then $14,000 by 2007, and finally ended up at $19,500 by 2008.

Your CAGR would be the ratio of your ending value to beginning value ($19,500 / $10,000 = 1.95) raised to the power of 1/3 (since 1/# of years = 1/3), then subtracting 1 from the resulting number:

1.95 raised to 1/3 power = 1.2493. (This could be written as 1.95^0.3333).
1.2493 - 1 = 0.2493
Another way of writing 0.2493 is 24.93%.

Thus, your CAGR for your three-year investment is equal to 24.93%, representing the smoothed annualized gain you earned over your investment time horizon."


http://www.investopedia.com/terms/t/ter.asp

"Total Expense Ratio - TER
What does it Mean? A measure of total costs associated with managing and operating an investment fund such as a mutual fund. These costs include mainly the management and additional expenses such as trading fees, legal fees, auditor fees and other operational expenses. The total cost of the fund are divided by the fund's total assets to arrive at a percent, which represents the TER.

Investopedia Says... The size of the ratio is important to investors as the costs come out of the fund and hurt the returns that investors achieve. For example, if a fund generates a return of 7% for the year but has a TER of 4%, investors' 7% gain is greatly diminished (to roughly 3%). "


HTH.

Have a great Thanksgiving!!!

Regards, Ken ("As Tim McGraw sings, "I hope you get the chance to live like you were dying.")

If you want a Spell Checker for InternetExplorer or Firefox to check MF posts or other web forms: IE => http://www.iespell.com or for Firefox => http://tinyurl.com/3pdwt

"Because love does not do sums, but instead makes choices, and then gives its all." From the story "The Burning Man" by Tad Williams (See I Corinthians Ch 13:4-13 it's in my profile quote)

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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48351 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 11:34 AM
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Beating the S&P is fairly easy if you have a good trading strategy.

You've said this time and time again Joel, but it doesn't make any sense. If this is true, then why do 80-90% of money managers, who spend their waking hours studying and following and learning about the market, not beat the S&P 500 in any given year. And probably well less than a percent do it consistently?

Unless you mean it's easy to beat the S&P 500 by investing in small caps which tend to grow faster, which would be fair, but is cheating :-), because then you should be looking at the Russel 2000.

But knowing you, I don't think you mean that... in which case you really need to try to explain why time after time professional money managers fail to accomplish what you claim is so 'easy'. Oh, and why your favorite timing service has also failed to do so for the last two years.

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48353 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 11:56 AM
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If this is true, then why do 80-90% of money managers, who spend their waking hours studying and following and learning about the market, not beat the S&P 500 in any given year. And probably well less than a percent do it consistently?

I wish they would clarify this statistic. Many funds are limited in what they can do. You run a Utilities Fund, you're stuck investing in utilities, or some other limitations. I wonder what the real losing to the S&P 500 is with funds with no limits? I'd wager above 50% still because of expenses, etc.

JLC


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Author: jbking Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48355 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 12:03 PM
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Greetings JLC,

I wonder what the real losing to the S&P 500 is with funds with no limits?

Wouldn't it make more sense to look at funds that invest in stocks similar to what the S & P 500 is,i.e. large-cap blend funds rather than those that are hamstrung by being in a different part of the market, rather than funds that can go anywhere and thus potentially crush it if some other market segment is doing better?

Looking at something like Vanguard's Institutional Index(VINIX) which has beaten the S & P 500 by 2 basis points annualized over the last 5 years, it beats 56% in its category over the past 5 years looking at Morningstar's data. Oddly enough, if I come down to the 500 Index Admiral shares(VFIAX) which have lagged the index by 3 basis points annualized over the last 5 years, it is just 1% worse in the category.

Regards,
JB

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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48356 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 12:15 PM
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Many funds are limited in what they can do. You run a Utilities Fund, you're stuck investing in utilities, or some other limitations.

That is true and it's a good point. But the fact is the number of funds that invest in categories that tend to returns more than the S&P - foreign, small cap, mid cap, reit, etc - almost certainly more than outweigh things like "utility funds". So if they are including all funds, it probably only makes it a stronger point.

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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48357 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 12:26 PM
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For one thing, it is easier for an individual investor with a fair amount of money to beat the S&P than big money managers because the individual investor is not managing several billion. Getting in and out of large positions is not simple, and such moves often change the market. Managers of large amounts of money are by necessity less agile.

I do not limit myself to any capitalization area - I do not look only at small, mid, or large caps. I just try to buy what is doing well. Of course, I do look at volume. Once I was interested in a stock, but when it had traded 0 shares by noon, I lost interest.

I have just begun to get used to trading individual stocks. It is certainly more difficult, psychologically, than trading mutual funds. Besides, a good fund is worth a 60+ day hold, and many stocks disappoint sooner. Trading mutual funds was a piece of cake, but that is pretty much over, although even with Fidelity's trading restrictions, I have done OK in my wife's retirement account (limited to Fidelity funds) this year. And I have some good ideas for next year.

Another thing about professional money managers: many of them are just flat stupid or devious. For various reasons, I gave some money to Louis Navellier once. He lost about 15% in one week, and then began to lecture me on thinking "long term". Fact is, the technical sell signals on the stocks he bought for me were totally obvious. In addition, you make more money in the long term if you avoid losing it in the short term. I took the money back, and have never dealt with a "professional" since than. I should also say that I have never lost that much over any period of time before or since, not even in a margin account.

Trend following timing services do not do well when there is little, if any trend. That is the problem with most of the timing systems at this point. But the market still does trend sooner or later - hopefully sooner.

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48358 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 12:30 PM
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"But knowing you, I don't think you mean that... in which case you really need to try to explain why time after time professional money managers fail to accomplish what you claim is so 'easy'. Oh, and why your favorite timing service has also failed to do so for the last two years. "

I don't assume to think for them but fund usually have a number of things going against them:

Low Liquitidy - they cannot trade as fast or as often as an individual investor. Funds have to notify companies (as well as reg agencies) when they buy and sell large amounts. They often have to make those purchases over a number of weeks instead of over a few seconds.

Need for diversification - The vast majority of funds, as a means to reduce volatility and increase deposits, market their funds as "diversified" and as such, cannot hold more than 10% in any one company. Many investors do not like for a fund to hold above 5% of any one company.

Too much money - Funds do eventually run out of places to put money. Microsoft ran out of places to put its money a few months ago and they decided to do a one-time dividend. Megellan (sp?) is so large that it has trouble finding places to invest any new money.

--------------

For a good example of what a fund can do when they are designed to operate like an individual investor, check out the Hennessy (sp?) 30. It is the best performing midcap fund over the last year - up about 40%. I bought some of it this summer after reading about it in Kiplinger. They use a very similiar strategy that says buy the top 30 that meet their criteria and every year, reblance based on the new top 30.

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48359 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 12:39 PM
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The actual name of the fund is Hennessy Focus 30 - HFTFX

Up about 25% since I bought it this summer and, from what I read, about 40% for the year. Very volatile though. It was up about 15% at one point, then down 10%, now back up 25%. But, what do I care, it is in my Roth so I am in for the long haul.

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Author: ToddW217 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48361 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 2:29 PM
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Joel,
Wow - I have seen your posts in the past, but some of these seem to be classics.

I'm paraphrasing your quotes -

"It's easy to beat the S&P 500"
Then why are you struggling to beat the Russell 2000? Why not just play the S&P?

"Professional money managers are stupid"
"I don't deal with them anymore"
Yet you go on to tell us how you 'trade' mutual funds with Fidelity in your wife's account. I'd consider Fidelity funds to be professionally managed - perhaps you meant this as a slap against Fidelity, but I doubt that is the case.

"Timing services don't do well if there is no trend"
The month of November seems to me to have had a pretty good trend - up! I've always been curious of the value in recognizing something after it has already happened? I suppose I'd rather buy something before it has appreciated, and sell it before it has depreciated...based on fundamentals of course...call me silly!

And finally, just simply the concept of trading mutual funds.
As much as I disagree with market timing/etc, I'll be open minded enough to consider that there may be times that it is a successful strategy. But trading mutual funds? Using an instrument that is designed to limit volatility, for an act that needs volatility?
Wow!








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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48363 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 4:30 PM
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I really don't think you understand what I am saying.

I am not interested in limiting my trading to 500 stocks. Why should I? Beating the S&P just means getting better returns somehow. In a down market, you might get better returns in a money market. Remember the 10 year performance of VFINX, with distributions re-invested: 10%/year with a 40%+ drawdown. Over the lat 5 years, as of yesterday's close, the thing was up .55%.

By professional money managers, I was referring to people who manage your portfolio. My experience with Navallier and one other who shall remain nameless was bad. And yes, I think it stupid to try to paper over your losses by saying one has to "think long term". Well, he had to say something, but that certainly did not convince me, and I think that you have to have a really low regard for my intelligence to think that such an excuse would work.

Fidelity funds have underperformed, in general, but it is all that is available for my wife until she retires.

All trend following timing schemes simply try to note the existence of a trend. Such schemes do not get you in at the bottom or out at the top, nor do they intend to. They simply look for the conditions that constitute the establishment of a trend, and know from experience that when these conditions occur, the trend is likely to last. Then they look for conditions that indicate the reversal of a trend. Nothing is perfect, and nothing works all the time. The long-term record is the important thing.

TimingCube did go long before November, but the date is for subscribers only.

There have been some trend-predicting schemes, but their performance has been terrible - at least all the ones I have seen.

I don't know what you mean by needing volatility.

Consider the Fidelity Selects. They are a large number of sector funds. Sometimes one sector is doing better than the rest of the market, and hence you need to be in that sector. Then when it cools off, you need to switch to cash or another sector. Using technical analysis, many people have successfully traded the Fidelity Selects, even with their 30-day trade limitation.

Now consider the broader market. There are good managers and bad managers. There are some hot funds and some that are not so hot. People warn about "chasing hot funds", but the example they usually use is usually something like seeing which fund did best last year and buying it for this year. As if people just woke up on January 2 and decided to switch their mutual funds around. That is, of course, fundamentally stupid, as is any fixed holding period.

Back in the early '90s I did very well just by looking at charts. Look at the funds available, and rank by total return for the last month. Compare the best to the indices, and consider only those that beat the indices over the last month. Then do the same for the last 2 and 3 months. It was generally possible to pick funds which had beaten the indices over those time periods, and just buy those funds. Then monitor the funds and repeat as necessary. Worked great, although now I have FastBreak, and it automates fund selection.





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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48364 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 4:42 PM
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P. S. If you want more "Classic Joel Williams", try

http://www.brill.com/clip7.html

I am utterly amazed that the thing I wrote is still there. Brill was the worst message board ever. Remember that I wrote this in 1999.

Listen to what the fund manager says - NOT!

True, sometimes this is instructive. But consider Robert Sanborn, manager of the Oakmark Fund. For the last 2 years the fund has been a real dog, or Donald Yactman whose 2 funds are down more than 20% this year. They say (according to an article in Investors Business Daily 12/9/99) that the problem is "short-term investors who don't grasp their funds investment methodology." Listen, dudes, I don't give a rat's ass about your investment methodology. I want to make money, and you are doing a bad job of that. So expect nothing from me. And maybe you should get a job more in line with your capabilities, like licking stamps.


Harsh? Yes. But Oakmark went down, and so many people sold the fund that he had to sell a lot of stocks, including some in which he still had gains. Then the people who stayed in the find were stuck with capital gains and a reduction in share value as well.

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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48367 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 5:45 PM
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TimingCube did go long before November, but the date is for subscribers only.

Buy

10/20/2005

After 30 days it's for anyone, fyi :)


All trend following timing schemes simply try to note the existence of a trend. Such schemes do not get you in at the bottom or out at the top, nor do they intend to. They simply look for the conditions that constitute the establishment of a trend, and know from experience that when these conditions occur, the trend is likely to last. Then they look for conditions that indicate the reversal of a trend. Nothing is perfect, and nothing works all the time. The long-term record is the important thing.

I agree, long term record is important, and long-term, timing services don't outperform the market, especially after you take taxes into account. Including your Timing Cube - other than their period when they were out of the market during the crash - they have trailed their indexes they're trying to beat.

You can make all the excuses you want, but long term, I'm willing to put money on the fact that they will continue to underperform as well. But that's what makes horseraces.

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Author: MadCapitalist Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48370 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 6:21 PM
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First, nobody with any sense would trade this way, either to pick the stocks randomly or to hold for 10 years.

You are unbelievable. You are basically saying that the world's greatest investor (Warren Buffett) has no sense. He often holds for 10 years or much longer.

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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48372 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 7:04 PM
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Well, to decide to hold for 10 years ahead of time is in fact truly stupid. Holding for 10 years, if there is a good reason, is OK.

And Buffett does not pick his stock randomly.

Besides, he has enough influence to be able to make management do what he wants.

And didn't he buy some BUD? That has been a loser.

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Author: MadCapitalist Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48373 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 7:26 PM
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And didn't he buy some BUD? That has been a loser.

He (as all great investors) has had plenty of successful investments that have declined first.

You keep on trying to sell everyone on trading, but so many of the greatest investors stay away from trading (Buffett, Lynch, Munger, Miller, Templeton, and on and on).

The best investors tend to be value investors, not traders. That's why you get so much negative criticism regarding your endless requests to everyone to start trading. You are like a religous zealot trying to proselytize to everyone who crosses your path. I'm just glad that most people know better than to convert.

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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48374 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 7:29 PM
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>> And didn't he buy some BUD? That has been a loser. <<

You've never had a loser?

Oh, I forgot -- you just don't HOLD them, right? Guess you're a better investor than Buffett, then. The loser doesn't know when to sell.

#29 (respects that some people can effectively time the market, and more power to them, but thinks it's irresponsible to preach to the masses or call buy-and-holders "idiots")

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Author: valuefanRLA Big red star, 1000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48375 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 7:49 PM
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A little late in the thread, but thanks for the resources Ken and JB.

Ryan

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Author: cliff666 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48376 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 7:54 PM
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The three year CAGR for my portfolio is 22.67%

I don't quite understand what I see happening, but my port is up 58% since December 31, 2002. Yes, I have added to the port every year, but no more than 2%. 100% mutual funds. Mostly American Funds, but with some Contrafund and Low Price Stock Fund in my 401K. And some REIT and VEXMX with Vanguard.

cliff

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Author: MadCapitalist Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48377 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/23/2005 8:19 PM
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Fact is, the technical sell signals on the stocks he bought for me were totally obvious.

They always are -- in retrospect at least.

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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48382 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/24/2005 8:57 AM
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Just for the record, what I do is try to help people make money. I have never read anything on this board from the rest of you that remotely helped me do that.

MC talks a lot, but I have never heard him recommend a stock or tell how to find a good one - nothing more than generalizations.

And no, I don't hold losers. Perhaps if I had enough of the company to influence its policy, and knew what they were doing wrong, I would do that. But I don't.

And yes, people who buy and hold - particularly buy and hold index funds - are absolute idiots. The facts bear that out. Want to beat the S&P? Over the last 5 years a money market fund has done that. Not that I recommend being in a money market fund at this time. But that puts it into perspective.

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Author: cliff666 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48387 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/24/2005 12:39 PM
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I don't quite understand what I see happening, but my port is up 58% since December 31, 2002.

Duh. CAGR 12.0%
cliff
... but I'll take it.

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Author: ResNullius Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48388 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/24/2005 12:53 PM
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And yes, people who buy and hold - particularly buy and hold index funds - are absolute idiots. The facts bear that out.

I retired two weeks prior to my 49th birthday. I still do a little part-time consulting out of my home in the mountains, but less that a 25% schedule. DW also retired. We have a beautiful home in a wonderful mountain village, paid in full. We have no debt at all, and we have far more money than we need to live in comfort forever, regardless of how long we live, plus our son will be a millionaire when we die. We did this by putting all our spare money in Vanguard mutual funds, including the SP500. We don't jump from fund to fund, but buy and hold. Are we idiots? I don't know, but I do know that we're living a wonderful life courtesy of hard work and conservative investments in Vanguard, and by not listening to folks who say they know how to market time and invest in individual stocks.

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Author: valuefanRLA Big red star, 1000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48390 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/24/2005 1:17 PM
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And I'm fighting the jealousy right about now... :-)

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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48391 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/24/2005 1:23 PM
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Just for the record, what I do is try to help people make money.

It's a good thing no one pays for you it :-P. Too many people are losing to the market as is over the last few years by following your favorite timing scheme.


And no, I don't hold losers. Perhaps if I had enough of the company to influence its policy, and knew what they were doing wrong, I would do that.

Ah, but, this is what makes no sense. A company doesn't have to be doing anything wrong for the stock to go down. The industry could just hit a rough patch, or they could be building for the future and therefore current results could lag a little, or the stock could dip cause some big institution decided to sell some shares.

I'm tempted to bring up Cheesecake factory again, which was opening up approximately 1 store per quarter for a long time. But some quarters, two stores would fall together, leading to a lot more opening expenses that quarter and lower earnings and the stock would dip, despite absolutely nothing changing. You would sell apparently... then who would be the idiot?

A company doesn't have to be doing a single thing wrong for their stock to dip. Stock price can wiggle and waggle all over the place without a single piece of news involving the company or industry. The idea that ever move of a stock price means the company has done something is ludicrous... and perhaps be the, or at least a, source of your great misguidedness?


And yes, people who buy and hold - particularly buy and hold index funds - are absolute idiots.

Frankly, I don't know where you get off. You come to a community that endorses low cost, buy and hold investing... and PAY to access to he message boards. A community that believes that study after study shows that it's extremely difficult to beat index investing - market timing and even fundamental analysis usually fail, time after time. And that index investing is probably the best way to end up with the most money in your pocket when all is said and done.

That is TMF's foremost advice, despite the fact that they do make money off of stock advice for people who'd rather go that way.

But let's even forget about the 'facts' here - that all the money and effort you put into trying to move between stocks and in and out of the market is probably 98% likely to leave you will less in you account than if you had been an 'idiot' and bought and hold an index fund. Let's forget about that altogether.

Instead, let's just look at what you're being... a troll. This community is founded on those ideas, they preach those ideas. If you did a survey on here, probably 90%, give or take, of people would endorse buy and holding index funds as a good idea or better. Probably 30 to 50% would think it's the best idea in investing. And you come on here and call everybody idiots. How DARE you. You're a troll Joel, you're a message board troll. You're like the sports fan who goes to another team's board and insults them. Or the Star Wars geek who trolls the Star Trek message boards and insults Captain Picard.

I strongly disagree with your ideas, and I have disproven Timing Cube, but I do not believe I have ever called you names. And I certainly did not go onto the Timing Cube boards (or if they don't exist, would I), and call everyone there idiots. And I sure as heck wouldn't pay money to do so. Gee, you pay $30 just to get on here and insult us all. Grow up and get a life.

Be respectful of our opinions, watch your mouth.

Happy Thanksgiving, you obnoxious jerk.

- Fred


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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48397 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/24/2005 5:34 PM
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And yes, people who buy and hold - particularly buy and hold index funds - are absolute idiots.


Bull.

There are MANY ways to make money in stocks. What they all require, that many people lack, is unemotional discipline.

Probably the easiest way to achieve unemotional stock-market discipline is to set up regular automatic investments in an index fund and just hold the stuff until you need the money. This discipline is EXTREMELY likely to make you money... although it may take a while. (I don't know if I would recommend it as a good choice to someone who is 5 years from retirement and just starting to invest. 20 years to go, yes, without hesitation.)

There are other methods that are more reliable in the short term and faster in the long term. But they require greater discipline - it's easier to not be upset about short-term fluctuations if you never look at them than if you look at them weekly or even daily. And looking at how they would have done in the long-term past, so one can estimate the likelihood of long-term success, is harder.

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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48398 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/24/2005 6:55 PM
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Hey, I post here for free. I absolutely would never pay to post here. I gain nothing from it except occasional amusement at the naive dumb ideas put forward.

But if you guys are happy with a scheme that gives you a 40% drawdown over the last 10 years, and only a small gain over the last 5 years, fine! Nobody has actually addressed that point.

Just don't tell me that it makes sense.

It does not.

Furthermore, I have no idea upon what this community was founded. If it is founded on dumb ideas like buy and hold of an index fund, then it is high time to point out just how dumb those ideas are. Personally, I am focused on making money, not (as Cramer says) making friends. I could post all manner of dumb things here are get lots of recs, if I actually cared about that sort of thing.

And, as I said, nothing I have ever read here has helped me to make any money. Nor, after I said that, did anybody offer anything.

Idiocy is idiocy. If I call it that, I am doing you a favor.

Enjoy your comfortable little community, just don't expect me to buy into it.

The board says "Retirement Investing". Gee Whiz! I thought it might be about making money in your retirement account. Instead it must be a support group for people who hold index funds or something. Maybe you need a 12 step program to help you make sense.



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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48399 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/24/2005 7:03 PM
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I gain nothing from it except occasional amusement at the naive dumb ideas put forward.

You've been here 7.5 years and you gain nothing from it. Your life must really suck if you keep coming to a place where it doesn't impact your life in some way. Personally, I would have found a hobby by now.

IF



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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48401 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/24/2005 7:08 PM
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Ah, but maybe this is my hobby. Cheaper than model trains. And there are other boards here where some sense is made.

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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48404 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/24/2005 10:57 PM
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The only response I have remaining is that maybe some of us have full time jobs that require our full attention during trading hours and that we can't pay attention on a daily basis to see what the indicators are supposedly telling us constantly.

Frankly, I'd rather live my life working hard and earning my raises and proving my worth and earning my job security, to have more money to sock away, rather than putting in half an effort with one eye on the market day in and out.

Even if would make me more money in the market... which it won't anyway.



Okay, I lied, one more response remaining. You love to use that "last 5 years number", which is one of those "lies, damn lies, and statistics" things. What you fail to acknowledge is that the indexes have really made money 4 (3?, I think 4) of the last 5 years. You know, the exactly opposite of how often your personal favorite Timing scheme has actually beaten the market.

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Author: rrosenkoetter One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48424 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/26/2005 1:08 AM
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>> And didn't he buy some BUD? That has been a loser. <<

If you look at BUD's fundamentals, you'd see why he bought BUD (and why I bought some too)...

Almost exact same reasons he got into Coke back in the 80s (which was a dog also for a while, but made him a bundle in the long run).



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Author: hjg0989 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48441 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/26/2005 3:36 PM
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<<<I gain nothing from it except occasional amusement at the naive dumb ideas put forward.>>>

So you are basically an output device. What a sad way to live.

-helen

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Author: MadCapitalist Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48476 of 75335
Subject: Re: Index Fund vs. Buying Individual Stocks Date: 11/27/2005 8:49 PM
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And yes, people who buy and hold - particularly buy and hold index funds - are absolute idiots.

The best investors appear to be investors who buy and hold. Buy and hold isn't the same as "buy and hold forever."

Apparently you think that the best investors are idiots.

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