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Author: GWPotter Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: If I Were to Take Over from FA... Date: 3/14/2014 12:16 PM
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IP a few points

#1 I feel comparing anything on a one year basis is at best misleading and maybe worse. Everything goes up one time and down another. I have a strong preference for avoiding capital gains by selling X after holding it a year because Y will (assume the FA really knows) than X in the next 12 months by some small amount.

If you want to see how stuff goes up and down take a look at this investment periodic return chart.
http://www.callan.com/research/periodic/

Today comparing with 5 year data is not easy, because with the exception of Morningstar, the 5 year data is not exactly March 13, 2009 to March 13, 2014 -- and since March of 2009 was the bottom it really will affect annual ROI by a lot.

VWENX returns with all dividends re-invested for the exact 10, 5 and 3 year periods ending with the March 13, 2014 market close:

10 Yr 8.09%
5 Yr 16.47%
3 Yr 11.19%

The VWENX performance as of June 30, 2013 had beaten both 60/40 and 70/30 returns of S&P500 & All bonds with re-invested dividends easily. The data takes some finding, but it out there.

Realistically unless you have enough money to keep an FA working just for you, you will get a formulaic system. Not only that, if your formula says more large cap Value or Growth, there will likely be only a couple of places for large cap whatever in your formula' system.

I have nothing against Vanguard or any other FA, but until I see one who can show me the data saying they have exceeded Wellington net of fees for at least 5 year, I am not interested. (As I said above just this year 5 years is a risky comparison because of how data can be gathered.)

It is not hard for people to beat any index or fund for a single year. Many people feel Warren Buffet is pretty good. The return of BRK.A for the 10 years ending March 13, 2014 was 7.27% -- almost 75 basis points less than VWENX and BRK.A took a bigger hit in 2008/2009.

Finally in this area, Vanguard has some target funds and other items with various allocations. These have not been all that great performers. I suggest you drill down and see what the holdings are. For example, why would you want to have X% of say Vanguard Explorer and Y% of the Vanguard ABC bond fund held on another name with another, all be it small, fee. Simpler to just buy Explorer and the ABC fund. This is just the reason I like middle of the road actively managed mutual funds. Any index type deal will have some dogs. Just avoiding the dogs without trying for top bragging rights can make a big net of fees advantage.
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