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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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Dodge and Cox

2

Comments

  • edited April 2020
    When I said best, I meant what the market thinks is best. It doesn't matter what I, you , Buffett or DC managers think. The market thru the price is the best voting machine. It's the final aggregate of all decisions, it's what actual investors pay for that company. The SP500 isn't a value or growth index, it's market-capitalization-weighted index. There is a good reason there are so many articles and research about it and why Buffett recommended it.
    Example:
    GE looked really great 30-40 years ago, where is today?
    AMZN didn't exist 20 years ago and now it's huge
    It's reflected in the SP500, no need to do any research or make a decision.

    Finally, you look at volatility(=Standard Deviation) and if the DODGX managers can't beat the index on performance + volatility it's a double strike, after all, these managers have to justify their paycheck and they failed on both.
  • edited April 2020
    I think you got the mandate wrong there. D&C is not required to beat the S&P 500. They are acting to select value stocks which they deem safer and worthy of their clients money. It's obvious to me that many investors do, judging by the AUM. For many of them it's not just all about who has the biggest pile of money at the end of the day. Not everyone can make trades after the fact.
  • @Mark, good point, but can't find any period where DODGX UI is not higher than FXAIX (say).
  • edited April 2020
    The problem for D&C has long been its high weightings in financial services, i.e., banks. That was a big mistake going into the 2008 crisis and they deserved to be criticized for it. Yet I am not so sure it is a mistake in 2020's crisis. Banks are financially much stronger today than they were in 2008 thanks to regulatory reform requiring them to have higher capital requirements that is now unfortunately being sabotaged as every kind of regulation is being dismantled by this administration. I think many of the largest banks will come through this crisis in reasonable shape. So it could be a smart move to overweight them this time. But in 2008 it was a terrible one.
  • edited April 2020
    I got out yesterday from OAKBX in my IRA. Eff this S***.

    I'm going to buy 100 SPY and sell 1 Covered Call All every week. Need to generate my own cash flow. I cannot rely on bonds in "balanced" funds providing ballast. If market keeps going down I will calculate my cost basis = price paid - premium collected and keep selling 1 call at strike = cost basis. If market goes up, I will keep collecting premium and potentially surrender the 100 SPY shares. If so, then will buy 100 SPY...rinse and repeat.

    Trying this out in IRA first so don't have tax headache. If it works, will sell every dang balanced fund I have and do in taxable too. With option commissions what they are now, this could be viable strategy.

    No one went broke paying taxes.
  • @VintageFreak I couldn't agree more with your last sentence. If your strategy works, perhaps you could give the site updates on your results !
  • @VintageFreak What's the cash flow worth if you lose your principal during a market downturn? A collared strategy, write a call, buy a put, might be safer and more bond-like, for providing income, although you'll get less income as a result. A covered call strategy with no downside protection from a put option works best in a sideways market that goes nowhere. Is that the kind of market you think we're in now?
  • edited April 2020
    Mark said:

    I think you got the mandate wrong there. D&C is not required to beat the S&P 500. They are acting to select value stocks which they deem safer and worthy of their clients money. It's obvious to me that many investors do, judging by the AUM. For many of them it's not just all about who has the biggest pile of money at the end of the day. Not everyone can make trades after the fact.

    See 15 years of risk/reward(link).

    As of 3/31/2020
    15 years aver annual performance...VFIAX=7.39...DODGX 5.45%
    15 years SD=volatility......................VFIAX=14.3...DODGX 17.1

    The SP500 made close to 2% more performance annually. If you invested $100K in each(VFIAX vs DODGX) 15 years ago, you would have now $293.2K in VFIAX but only $223K in DODGX
    But DODGX had almost 20% more SD=volatility.

    This means the SP500 was a better risk/reward fund than DODGX. Unless you disregard the numbers above, how can you explain "safer"?

    BTW, for 10 years (link), the numbers for DODGX get even worse. VFIAX had 2.33%(11.04 vs 8.7%) better annual performance (instead of close to 2% for 15 years) + SD is still worse(higher) for DODGX by over 20%

    To the question of size? "You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time." The SP500 + US Tot Index (VTI) are so much bigger than DODGX but wait, most of the saved money is thru 401K, employers now must in most cases use indexes, especially for US LC and/or very cheap funds such as Target funds (mainly based on indexes) because it is very difficult to defend fiduciary duty.

    and we already discussed that VFIAX expense ratio is so much cheaper too at 0.04% but VOO=0.03% while DODFX = 0.52%

    Finally, nobody can stop you investing in DODGX, after all, it's your money but the above was a pretty clear case, at least for me:-)

  • and FXAIX is cheaper yet
  • edited April 2020

    @VintageFreak What's the cash flow worth if you lose your principal during a market downturn? A collared strategy, write a call, buy a put, might be safer and more bond-like, for providing income, although you'll get less income as a result. A covered call strategy with no downside protection from a put option works best in a sideways market that goes nowhere. Is that the kind of market you think we're in now?

    So I guess I was being a little flippant. However, if I am already invested in a fund which does not hold up as well as I expect it to (and is why I have forgone its results on the upside), then the time has come to fire the manager. That's my point.

    First, if I'm doing this in taxable account, I'm booking tax loss. Next I'm taking same amount of money and investing in SPY and the day I do it immediately selling a call. I'm already ahead. Even before that, I'm first selling a Put first and making SPY come to me before I even buy it. SPY can keep going up I don't care, I will keep collecting Put premium. The day SPY gets put to me I will start doing Covered Call. Another thing I'm looking at is Bull Call Spread.

    Downturn will not protect my SPY but the way OAKBX is behaving, my premium collection couldn't do worse. If it's a "balanced" fund I want, let me create my own without bonds. I think after all this time I owe it to myself.
  • edited April 2020

    and FXAIX is cheaper yet

    Correct, since I started talking about Vanguard I wanted to stay with it.

    Fidelity 500 Index Fund ( FXAIX )=015%...Vanguard 500 Index Admiral (VFIAX)=040%
    Fidelity Tot Market Index Fund ( FSKAX ) =015%...Vanguard Total Stock Mkt Index Admiral (VTSAX)=0.4%

    But if you are really obsessed about expense ratio then Fidelity has several funds with zero expense ratio.
    Fidelity® ZERO Large Cap Index Fund (FNILX)
    Fidelity® ZERO Total Market Index Fund (FZROX)
    Fidelity® ZERO Extended Market Index Fund (FZIPX)
    Fidelity® ZERO International Index Fund (FZILX)

    But FNILX didn't do better than VFIAX since inception.



  • Your contrib is so valuable, but are you really so insecure you have to impugn ('obsess') anyone who offers even mild corrections or challenges ?

    Anyway, let me add that FXAIX does not outperform either Vanguard SP500 product if you go back to their spring 1988 origin, only more recently.
  • Your contrib is so valuable, but are you really so insecure you have to impugn ('obsess') anyone who offers even mild corrections or challenges ?

    Anyway, let me add that FXAIX does not outperform either Vanguard SP500 product if you go back to their spring 1988 origin, only more recently.

    Nothing to do with insecurity, trying to be accurate. FXAIX didn't perform better because it didn't have a lower ER all these years. The main difference between me and others is that I supply numbers and not just narrative;-)
    As of (04/07/2020) FXAIX did better than VFIAX for 3 + 5 years by only 0.02% annually.
  • I don't have a dog in the fight, but I did take a quick look at upside/downside capture ratios for DODFX on M* and they are terrible for 3, 5 and 10 years. T

    It is well know that large cap is the hardest category for a fund manager to "beat" the index. It is very unlikely that it can be done and if it can be the investor picking the "the winner" ahead of those 3, 5 or 10 years is close to impossible. If the case for owning a managed LC fund is a smoother ride or principle conservation and not beating the index return (which it is for me), the up/down statistic is a good one to judge performance.
  • Great insights and discussions..will likely add little mixed hybrid of D^C funds, vanguard total stock + SPY with new monies /buys
  • why not VOO instead?
  • FD1000 said:


    Anyway, let me add that FXAIX does not outperform either Vanguard SP500 product if you go back to their spring 1988 origin, only more recently.

    Nothing to do with insecurity, trying to be accurate. FXAIX didn't perform better because it didn't have a lower ER all these years. The main difference between me and others is that I supply numbers and not just narrative;-)
    As you're a numbers sort of person, could you provide some numbers to go along with your narrative? The story saying that FXAIX "didn't have a lower ER all these years"?

    I can find some early years over the lifetime span when VFINX had an ER more than a single basis point below FXAIX's. But there aren't very many years like that, and the VFINX advantage in those years was just 6-9 basis points. In contrast, there are a greater number of later years where FXIAX had the advantage. More sizeable to boot, 8-15 basis points.

    From what little I can find, it seems that FXAIX overall had the lower ER all these years. I look forward to seeing the ER numbers for "all these years".
  • Riffing on @LewisBraham responding to @FD1000: 2001 dot-com specialness -- a lot of "top" companies got to the top and....

    In the short run, the market is a voting machine; in the long run it is a weighing machine. Belief in that principle (as well as the logic of buying a quarter for a dime) is what is makes value investing logic appealing to many investors.
  • Everyone knows the appeal, I bet, but I have to ask (being too lazy to do the work myself, at least now), over what multiyear spans since the later 1970s has VOOV outperformed VOOG or RPV RPG?
  • msf said:



    From what little I can find, it seems that FXAIX overall had the lower ER all these years. I look forward to seeing the ER numbers for "all these years".

    It would be very time consuming to find ER for previous years but from memory, Fidelity lowered ER for their index funds years ago to compete with VG.

    From M*, for 5 years average annual as of (04/08/2020)...FXAIX=7.9%...VFIAX=7.88...VOO=7.86
    It's a surprise that VOO with lower ER had lower performance than VFIAX
  • edited April 2020

    Riffing on @LewisBraham responding to @FD1000: 2001 dot-com specialness -- a lot of "top" companies got to the top and....

    In the short run, the market is a voting machine; in the long run it is a weighing machine. Belief in that principle (as well as the logic of buying a quarter for a dime) is what is makes value investing logic appealing to many investors.

    Statements like this are really meaningless. 15 years is pretty long and over long term it's being proven that a very cheap, "stupid" but a smart idea like the SP500 will beat most managed funds
    What is VALUE? value means different things to different investors. Is Buffett value equal D&C value.? Is T a better value than AAPL?

    The best voting machine is the market thru the price. It doesn't matter what anybody thinks, the price reflects the end results of all decisions. The price is always right and the price will affect the SP500.
  • Sooner or later the "price is right", that's what I think. Check the price from 2/23 until present .
    Derf
  • edited April 2020
    @FD1000
    The price is always right
    I don't think the price was always right when the market bid up Pets.com, Adelphia Communications, Enron, Worldcom, Washington Mutual, Lehman Brothers, tulip bulbs, etc. throughout history in past manias. But there are those who believe what you are saying. They're called efficient market theorists and would recommend only buying a total market index fund. I don't really understand, though, if you believe that, why you're posting on this board, which is devoted primarily to actively managed funds with managers who don't believe the price is always right. Those two philosophies--the price is always right or the price is often wrong and there are ways to get an edge on the market through active management--are incompatible. So if you don't mind my asking, why are you here?
  • edited April 2020
    He does good research?

    @LB, to jump back onto an earlier horse, would you conclude that the reason VOOG constantly outperforms FXAIX / VOO, and RPG almost does (forget VOOV and RPV), has to do with what the nominally growth ETFs exclude?

    (and CAPE beats all, over time)
  • edited April 2020
    @davidrmoran: if you are lazy, then I must surely be irredemiable. In any event, I do not have the time to pull those numbers either.

    However, when I was younger and had more time (but less money to invest) I did a set of analyses comparing historical cumulative returns for domestic and global value and 60/40 balanced funds on successive rolling intervals, and found that a small (but reasonably-sized number, hidden in plain sight) set of actively-managed, value-tilting funds beat the market.

    My familial background also instilled in me the practical wisdom of buying a dollar for $0.75. My academic and professional backgrounds have made me students of transience and hype, and thus suspect of markets and tautological arguments about rationality and invisible hands. I recall a classic series of articles appearing in the Administrative Science Quarterly ages ago which evaluated whether "the market" necessarily allowed the "best" ideas to survive (you can guess the conclusion, since I'm noting them here). LewisBraham's examples of the short and long term impact of extraordinary popular delusions are well known, and certainly strike a cord with me: I fear the madness of crowds. Even Adam Smith had his doubts! Certainly, if we wanted to get into politics we could question the notion as to whether "the market" or "voting machines" have produced the "best" political leadership for our country by any reasonable standard.

    In any event, to each his or her own: that's what makes a market. You may end up benefitting from my ignorance in the immediate, near, and / or long run. In which case, you will be having a drink on me. In the interim, I have adopted a system for investing that is in accord with my values and experience. If it keeps me in the market, I surely benefit. And, ultimately, I'm always updating my prior.
  • +1

    yeah, to slam together wannabe-wise cliches, the market can continue to vote, not getting to weighing, longer than you can stay afloat

    'student of transcience' is good, esp now
  • edited April 2020
    @davidrmoran Not only what VOOG excludes but includes. Without doing too deep a dive, VOOG has a 32% weighting in tech stocks. VOO has a 21% weighting. Although I don't think VOOG breaks out sectors like the S&P 500, the tech sector isolated by itself from the S&P 500 has dramatically outperformed it since 2009: https://morningstar.com/etfs/arcx/xlk/performance
    I would imagine this tech effect would be even greater in VOOG because it probably only owns the growthiest tech names, not the loser ones like Hewlett Packard all those years, the one tech company value managers found attractive. VOOG, for instance, has almost double the weighting of Amazon of VOO. RPV's tech weighting is a mere 2.3% and its financials is 34%. As I said above, the real story here isn't really just a growth versus value one. It's a tech sector versus financial sector one. To the extent that tech stocks are overvalued as some like Netflix I would argue are, the value managers will win. To the extent the financial services sector gets disintermediated by the tech sector--talk for instance of Amazon managing money soon or other tech companies doing banking--than the growth sector will win. The past ten years have been about Amazon, Google, Microsoft, Facebook and Netflix ostensibly taking over the world. If you believe that trend continues, you go growth. If you don't, you go value or cash.
  • Thanks for this granularity, which I shoulda figured out, I think.

    yes, gogo tech, esp gogo very large tech, has just skewed everything significantly, points out this longterm value investor. I do believe FANG etc. will largely continue.

    QQQ / XLK for all, then ! :)
  • edited April 2020
    Interestingly, the SPDR Tech ETF, XLK, leaves out Amazon because I imagine Standard & Poor's categorizes it, foolishly in my view, as a retail or consumer stock, yet the SPDR tech sector ETF still crushes the S&P 500 without it. One can imagine how much more the tech ETF would've crushed the S&P 500 if Amazon was also included. VOOG does have a big chunk of Amazon with a 5.8% weighting. My thoughts on Amazon as a $1 trillion company is, A, how much bigger can it get, i.e., when does the law of large numbers kick in, and, B, what happens to its supply chains due to covid as well as the trade war and C, is there some young upstart company that could threaten its business in some way? Retail probably not, but cloud computing--that seems a more competitive space. Finally, is it possible regulators may eventually attack it for the monopoly it really is? It is a $1 trillion company with a trailing p-e ratio of 89 and a forward one of 69 when the long-term avaerage p-e for stocks is about 15. The response of analysts who've all become converts to the stock is that it will "grow into" that p-e ratio. Will it?
  • har, probably a good buy now, so to speak, like all the big others
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