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Asking Guidance on Long-Term Growth through Mutual Fund Portfolio Diversification
I'm not sure a heavy LCG is super prudent but its understandable why someone wants it. Return isn't everything but I'm kind of the mind that if people are tilting LCG its largely return related. therefore prefer a LCG index compared to products like contrafund or whatever bluechip fund you chuck at it. But all in all this could be a worse portfolio.
Diversification: I would probably suggest barbelling your LCG tilt with something small/mid cappy and maybe a bit more value'y. And I do believe most should have a smattering of international investing in their portfolio. Only because we don't know the future.
Growth Potential: There are a few gotcha's here. continued mutual fund management over long periods of time is like chasing unicorns around. Sure we have documented success stories but a few things are real. 1. People age/philosophies change and 2. the black swan event of tomorrow will require different decisions than the BS events of yesteryear.
The other Gotcha here is "what to do in the next 5-10 years" way of thinking. These are the types of strategies that most often lead one to underperformance. I believe it was Oshaunnessy who said the best portfolios at Fidelity are the ones that people forgot existed or the owners were dead. Build a portfolio today that you feel can last a very long time. obviously circumstances change and decisions will have to be made here or there but don't go into an investment because "this is how i think the next decade will look" . Some people succeed at this but most do not.
Risk Control: If you want returns you are going to have to take risks. Can we control risk with the types of stocks we pick or how many we pick? yeah probably. Nothing is set in stone and there are ebbs in flows but the easiest way to control Risk in equities is diversification.
Costs and Fees: per morningstar as it pertains to large cap equities, 18% of active funds that are in the lower half of expenses outperformed their index over a 10 year period. only 6% of the more expensive ones could say they did. So expenses do matter. Now that study isn't perfect. if .50 is placed in the cheaper half and .51 is considered the more expensive half it doesn't give us all that info but its gives us a snapshot that costs do matter. Once again also noting that returns aren't always all that matters (while also noting observably in most other places, it is all that matters to the avg investor)
Comments
Diversification: I would probably suggest barbelling your LCG tilt with something small/mid cappy and maybe a bit more value'y. And I do believe most should have a smattering of international investing in their portfolio. Only because we don't know the future.
Growth Potential: There are a few gotcha's here. continued mutual fund management over long periods of time is like chasing unicorns around. Sure we have documented success stories but a few things are real. 1. People age/philosophies change and 2. the black swan event of tomorrow will require different decisions than the BS events of yesteryear.
The other Gotcha here is "what to do in the next 5-10 years" way of thinking. These are the types of strategies that most often lead one to underperformance. I believe it was Oshaunnessy who said the best portfolios at Fidelity are the ones that people forgot existed or the owners were dead. Build a portfolio today that you feel can last a very long time. obviously circumstances change and decisions will have to be made here or there but don't go into an investment because "this is how i think the next decade will look" . Some people succeed at this but most do not.
Risk Control: If you want returns you are going to have to take risks. Can we control risk with the types of stocks we pick or how many we pick? yeah probably. Nothing is set in stone and there are ebbs in flows but the easiest way to control Risk in equities is diversification.
Costs and Fees:
per morningstar as it pertains to large cap equities, 18% of active funds that are in the lower half of expenses outperformed their index over a 10 year period. only 6% of the more expensive ones could say they did. So expenses do matter. Now that study isn't perfect. if .50 is placed in the cheaper half and .51 is considered the more expensive half it doesn't give us all that info but its gives us a snapshot that costs do matter. Once again also noting that returns aren't always all that matters (while also noting observably in most other places, it is all that matters to the avg investor)