"index hugging"I can feel the contempt for indexers in those words.Later he readily admits that Vanguard S&P 500 Fund VFINX, with it's low expense ration of 0.18% has a huge advantage.Why bother with all the pain and hassle of trying to find that illusive fund that will beat the S&P 500 index. Another problem, Legg Mason Value Trust, is a Large Cap Value Fund. Therefore comparing it to the S&P 500 is equivalent to comparing Oranges to Tangerines.How about using the S&P Large Cap Value Index? Tell us what happens then. Compare it to Vanguards Large Cap Value Index Fund, VIVAX and then show us the fair comparision.Seriously anyone who thinks this Champion Fund bull is good, you need to read these cheap books by some of the greatest Financial minds from the US:Coffeehouse InvestorCommon Sense on Mutual FundsRandom Walk Down Wall StreetFour Pillars of Investing.Your time and money will be better spent reading these 4 books and then setting your financial future pretty much on Auto Pilot. Of course you do need to keep an eye on it.
None of those funds are particularly good unless they are timed. But then if you can do that you can pick better funds - ones that time well. Maybe even a leveraged index fund.Anyway, if you are idiotic enough to just buy and hold, then you will get the usual bad results.
Anyway, if you are idiotic enough to just buy and hold, then you will get the usual bad results.I'm idiotic enough, thank you.KennyO
Hey, Kenny, Whatever turns you on.You might look at TimingCube to see what you could do if you were not so idiotic.If you had been in VFINX for the last 5 years you would have lost 7%.If you had been in LMVTX for the last 5 years you would have made 8%.Over the same period of time, a money market fund would have mae 17%.I do not recommend any of the 3 alternatives above, of course. But it is an interesting comparison. Five years is a long time.But aren't those results just wonderful?
Joel,How do you plan to continue market timing with mutual funds with the majority of funds adding short term trading fees? How would the TimingCube results look if you were required to hold the recommended funds for a minimum of 30/60/90 days, or else pay a 1% or 2% penalty?I've read through your entire website and actually agree with you on some aspects of cutting losses by using market timing, but it looks as if Elliot Spitzer has crashed this party and has made frequent trading of mutual funds nearly impossible for the average person.One last comment from a fan of yours - referring to buy & holders as idiotic reduces your credibility more than you may realize. Please continue to argue your points with facts rather than derogatory comments.-L1
The timing cube results are with ETFs, which can be timed. Going short requires a Rydex or short fund if you are in an IRA. Otherwise, you can generally fund shares to short for your taxable account, though not always.I agree that it is becoming impossible to time actively managed mutual funds. The people who run those funds have used the scandals try to trap people in their funds forever. There are without principle, since when they could they allowed timing if you had enough money (but often not for small investors), and when they got caught they have an excuse to ban people from their funds. Managing a mutual fund becomes much easier if you have captive sheep for customers.In some cases, particularly at RS funds, customer service reps have given false information over the phone as to the availability of funds for trading. This is without excuse, but there is really no recourse.Part of the problem is that they never define market timing; hence they can ban anybody for anything.I have posted some FastBreak schemes on my site for trading ETFs and stocks.Harry Larson has posted schemes for hedging on his site. For example, with his Signal = f5nsf: When the signal is buy, hold the long combination of 75% ARGFX + 25% UAPIXWhen the signal is sell, hold the hedged combination of 75% ARGFX + 25% UCPIXThis gives you about 38% average annual % with a drawdown of about 7% since 3/16/2000. He has other examples, and you can get a free trial.http://fundbuster.com/index.htmlThis might be an excellent alternative, particularly in a taxable account. You do need to rebalance at some point - perhaps quarterly.However, what is needed is a way to trade stocks based both on fundamentals and technical analysis. CANSLIM works, but it is a lot of work, and there are money management issues. I am looking into ways to use Zacks list of highly ranked stocks and trade within them.The problem is that the number one list changes rapidly - it has already this month had about a 30% turnover. So we need a way of trading from a changing list. I am working on it. Unfortunately, there is virtually no way to backtest trading from a changing list. Zacks Focus list changes less often, and there might be an advantage to trading from that.
Joel has responded to some of your questions about the difficulty of "timing" mutual funds, given the increasingly-common penalty fees. He correctly points out that "market timing" is meaningless since it is rare to find true consensus among all parties as to what it means.For instance, here are some samples of "early redemption fees" that I've encountered in the past few months while shopping around for fund I was considering purchasing. I don't recall which funds are which and it's too much trouble to dig them up, but the fees stuck in my mind.Sell within 7 days = 1% penaltySell within 30 days = 2% penaltySell within 90 days = 2% penaltySell within 180 days = 2% penaltySell within 365 days = 1% penaltyOkay, there's enough to begin the confusion. Now lets's add the fact that a broker like TD Waterhouse imposes its OWN "early redemption fee," but ONLY IF THE FUND COMPANY ITSELF DOES NOT. And ITS fee is potentially more punitive:Sell within 90 days = .5% of transaction total, MINIMUM of $24.There's a maximum, too, but the point is that the arbitrary minimum of $24 = .5% of $4800, which means a lot of people will be hit with a much higher percentage.Let's say a small investor wants to buy some of Fund FOOLX, which has a minimum purchase level of $3000. Well, because of its style and holdings, that purchase overweights his portfolio in some manner. So let's say he wants to reduce the FOOLX position by 40%, or $1200. A half percent fee would be $6 -- but Waterhouse will charge the minimum $24, which is a 2% fee.Big investors may not give a rip about this -- which is one of the problems with Wall Street, all brokers, and so on. If you want to bring up Elliot Spitzer, why not write to him and ask him why virtually every aspect of investing is stacked against the little guy. IIRC, Vanguard was recently nailed for allowing certain kinds of trading to happen later in the day for bigger investors than they would for smaller ones. (This is long ago, before the Wellington flap.) It's also true that many fees go away (at Vanguard, Schwab, and many others) if you have a lot of money in an account -- but of course, all those fees help prevent a small account from growing into a big one in the first place! It's a game, a sham. All this talk about protecting investors is just that: talk. I think Spitzer is a brilliant man but I haven't heard a single politician raise the issues I've raised here.Back to "market timing..." I remember a few months ago when Oakmark announced that it was going to add an early-redemption fee to OAKBX. Without the least trace of embarrassment or guilt, they said that they had not experienced any problems with excessive movement in and out of that particular fund -- meaning they did not NEED the fee to serve as a disincentive to active trades. The only reason they added the fee was cosmetic, so to speak -- to make their fee structure uniform across all their funds.I did not hear a whimper or a whine from anybody. No columnist railed against this abuse of the investing public. What Oakmark decided -- and said without any shame -- was essentially, "We are going to impose a fee on some unfortunate investors for one reason: BECAUSE WE CAN. We don't NEED the money and we don't need to protect the fund. But we see a chance to suck a few bucks out of our investors, and in this climate, we recognize that even the lamest excuse on earth will fly."I did not pay much attention until a thread here made me aware that Oakmark had CLOSED that fund to new investment. Now, think this through with me. They instituted a poorly-reasoned fee, charging people for early redemptions (i.e. SELLING fund shares) -- but their REAL problem with keeping the fund healthy was that there were too many people BUYING shares! Gee whiz, it seems to me that if they had taken away the early redemption fee maybe the asset bloat problem would have solved itself a little faster! So we can add a bit of stupidity to the already identified greed, in the management of that fund. Of course, ironically, the fund has been a pretty good performer and I own some of it -- but there is nothing the company ever said that tied its POLICIES to the fund's PERFORMANCE. It is precisley that kind of disconnect, where fees are not required to keep the asset base stable, or to manage the fund's performance, that in my view should be getting more examination by the SEC and/or the NY Attorney General and anybody else who matters.
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