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Fund purchase regrets

Curious as to some of your bad fund purchase regrets.

When I was a novice at this, I got sucked in by a convincing interview that a guy named Jim Crabbe did on Wall Street Week. So, I bought into Crabbe Huson Special. It went south pretty quickly.

I also got into Berger 100, just as Bill Berger retired and handed the reigns to Rod Linafelter. Linafelter had been groomed for several years, but when he took over, the fund was never the same.

Comments

  • Anything run by Rob Arnott
  • edited March 2014
    HDCCX
    Turns out I bought it at the top. Watched it drop for a year before selling. It has since been liquidated.
  • FYI: I bought this fund as an IPO in 2007 and slowly watched the share price and dividend sink into the sunset. In 2012, Jill Evans & Kevin Shacknofsky were shown the door. Luckily, I held AOD in an taxable account and am writing off the loses. I would be very careful dealing with Sam Lieber and Alpine.
    Regards,
    Ted
    Regards,
    Ted
    (AOD) IPO :http://www.marketwatch.com/Story/story/print?guid=BF44E959-E476-4B9F-9E44-C1D52F12FEE0
  • AQRIX

    Still like the strategy.

    But AQR Funds turned out to be genuinely disingenuous.
  • In solidarity with Charles, I nominate TNEYX, an Invesco target date fund invested ~ 100% in an Invesco risk parity fund. As I watched it after buying a first chunk, decided risk parity is not for me unless it's a declining interest rate environment.

    But I just checked it, and it hasn't done that badly over the past year (but not good enough I regret selling it). They've moved most of the fund assets to an "aggressive" risk parity fund I didn't know they offered -- apparently heavier in stocks.

    "Genuinely disingenuous" sure rolls trippingly off the tongue ...
  • edited March 2014
    @AndyJ
    An interesting target date fund, at the least. Only 4% turnover noted, majority Eurozone and an interesting bond area.

    Composition at Fido
  • gindie, I was impressed with Bill Berger on a Wall St. Week with Louis Rukeyser show, and purchased the Berger 101 Fund. Very shortly thereafter the fund was turned over to
    Rod Linafelter, who did quite poorly here as well.

    also Dessauer Global Equity, no longer in existence.....bought as an IPO as a closed end fund, and it later converted to an open ended fund. There is a long story about this fund, too boring for most to hear, but the fund was awful.

    also Lindner Dividend fund and Lindner Growth fund, which both had storied histories and at one time great risk adjusted performance.....no longer in existence

    The Markman Funds (conservative allocation fund, moderate allocation fund, aggressive allocation fund). These were 'fund of funds'. The manager, Robert Markman, made an ill timed bet on tech stocks........I became interested in Robert Markman after a glowing article in Barron's, and he was also featured in Louis Rukeyser's Mutual Funds, an investment newsletter

    PURIX, the Purisima Total Return Fund, run by Ken Fisher, a Forbes columnist.
  • Hi Gindle,

    Since future returns are uncertain, it is almost a certainty that every investor has suffered the pains coupled to wealth erosion from bad investment decisions. You are definitely not alone in this common experience.

    Regret is a ubiquitous emotional part of the investment cycle. Here is a Link to a bunch of Carl Richards cartoon-like napkin sketches that illustrate 27 emotional aspects of the roller-coaster ride that investors typically feel:

    http://www.businessinsider.com/carl-richards-napkin-sketches-2013-9?op=1

    These sketches nicely stress the behavioral pitfalls that investors frequently confront.
    Even among financial professionals, being successful on two-thirds of their investment decisions would place them on the investor honor roll. Nowadays, since institutional investors dominate trading, whenever you place an order you are most likely matched against a seasoned and smart expert who has an opposite viewpoint.

    Given that scenario Bill Sharpe offered the following question and observation: “Are you smarter than the average professional investor? Probably not.” When trading frequently, a private investor is at a distinct disadvantage. If you are especially susceptible to regret, one obvious answer is to trade less frequently.

    An investor must learn to manage his emotions. He must develop a short memory for failures after learning from them. As Thomas Edison recommended: “Don’t call it a mistake, call it an education.”

    To reduce exposure to regret, an investor must apply a technique that the military termed “situational awareness” for honing survival prospects. If fund management changes, it is a signal to increase situational awareness. Likely, one of the reasons that you purchased that particular fund has now been replaced. That’s a hard, actionable alert. When a roadway turns icy, a more cautious and focused driving discipline is the order of the day.

    The good news is that we become better at assessing these situations with experience. I suspect that Malcolm Gladwell’s 10,000 hour rule (from his Outlier book) also applies to investing acumen. We slowly evolve from the novice to the expert class of investors as we persevere, accumulate both positive and negative experiences, and develop an instinct to accurately score our performance against a fair benchmark. Although nobody ever fully eliminates regret, major incidence frequency reductions are achievable over time.

    Jesse Livermore remarked: Remember the clever speculator is always patient and has a reserve of cash. It’s always a prudent policy to have a Plan B prepared as protection if Plan A crashes and must be abandoned regardless of high hopes. Often high hopes do not translate into real profits. Flexibility to accept a disappointment and to change direction is a necessary investor attribute.

    Yet another simple way to limit regret situations is to construct your portfolio from passive Index products instead of actively managed mutual funds. That option may seem dull, but it cuts away performance extremes.

    Building a portfolio of successful actively managed mutual funds is great stuff when successfully executed, but it doesn’t work out that way all too often. Active fund managers generate very asymmetric outcomes. The losers far outweigh the winners in terms of numbers and excess returns. Taken over extended timeframes, the likelihood of regret is far more probable for an actively managed portfolio than it is for its passively managed equivalent. The more you or your manager trades, the more you expose yourself to potential regret.

    A passive strategy has the added benefit of low costs. As Warren Buffett noted: “Beware of little expenses; a small leak can sink a large ship.”

    Investment catastrophes happen. So you must cultivate a survivor’s attitude of mental toughness. Learn from the failures and move ahead; stay the course.

    I recognize that I have not provided any specific examples of a decision that evoked regret. I decided to reply in more general terms that address techniques to reduce the regret quotient. I hope you found this generic forward-looking reply somewhat useful.

    Best Regards.
  • Wise words, MJG. I've found some of my best active-fund decisions have come when I've bought a fund with a great 10 year record but a lousy 3 year one which is causing it to lose assets, despite unchanged management. That way I am not betting against the pros, but against my fellow retail investors, who have famously bad timing for mutual fund investments.

    Obviously you want to check out the fund in detail, try to see if the early outperformance was a fluke or not, but I've found this method to be a good starting point.
  • Picking up on expatsp's strategy...What fits this "out of favor" type of fund right now? If I were to guess I might direct my attention to Emerging Markets equity funds (MAPIX, WAEMX, PRLAX) or World/EM Bond funds (FNMIX, TGBAX), your thoughts?
  • I was terribly hurt by Artio International (I think the old symbol was BJBIX and prior to Artio it was owned by Julius Baer). I thought Rudolph Younes and Richard Pell walked on water, as I lost 50% of my investment. And to add insult to injury, because I held it in a retirement account, I could not deduct the loss.

    From all the funds I have owned, if there was ever one that I thought couldn't go so far south and stay there, it was this fund. How wrong I was!

    Mona


  • edited March 2014
    Van Wagoner Funds. I invested as the funds came out, held on as they went up, then they came down hard when accounting issues surfaced which is where I sold my positions, only breaking even.

    Amerindo Fund did well then fell apart when the market fell apart, losing a small position before getting out. Then one of the principals was arrested. Not a good sign.
  • I mildly regret having bought VMMSX which is the Vanguard Emerging Market Select Fund. I was tired of the lackluster returns of PRMSX which I held onto for over 6 years, so I swapped into the Vanguard vehicle which at least has a lower ER (and I hate to admit it, but better short term performance was a driving factor too). Besides the lower ER, the main attraction of VMMSX was that it is partially sub-advised by an team at Oaktree emerging market group which I heard has produced spectacular results on the private wealth management side of the fence (although I have no proof of this). The other sub-advisors are Wellington, Pzena, & M&G. Although I guess they are all reputable shops, my conviction level is low as I really have no way to evaluate the talent and track records of the people managing this fund. Despite the regret, I will continue adding to it for as the asset class (particularly large cap EM value) seems to be out of favor.
  • GRTVX, which I first heard of here.
  • edited March 2014
    Regrets? None really. Live & learn. Get over it and move on. But the long-short and "market neutral" approaches have been disappointing. After trying several of these funds over roughly a decade, reluctantly reached the conclusion I can hedge more effectively varying my cash position along with holding various moderate allocation funds. Varrying one's cash position is fraught with peril - but IMHO no more so than these typically high expense funds that attempt to do the hedging for you. And, I'd guess it's easier to do the hedging when managing relatively small amounts (under 1 Mil) than when running a large fund worth several hundred Mil.
  • white/red oak funds -- first learned of on fundalarm. good that at the time i had very little money to lose. not too expensive a lesson to follow the herd.
  • Most of the time 5 years worth of doing nothing will turn a fund regret at least into a fund purchase that one can live with.

    One bad choice that comes to mind was a Merriman Fund. It was a fund of funds market-timing fund. I was young and fey and didn't realize the impact of 2 sets of fees, nor true difficulty of timing the markets with mechanical systems.
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