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.
This article appears to equate actively managed to picking bonds and stocks that perform better than average (seeking alpha). It ignores mentioning other tools such as using leverage, short sales, derivatives, etc.
I once read a science fiction author who stated that if we encountered a race of people with vastly superior intelligence, it would appear they did things by magic. This is how I feel about how PIMCO actively manages their funds such as PAUDX. It appears to me they use tools that are far beyond my capabilities, i.e. their intelligence is vastly superior to mine.
My question is: If we don't understand fully a fund manager's investment techniques, how do we evaluate their funds for investments. Are we left with trust due to their past performance, do we look at returns and yield, other criteria? Will a Morningstar Snapshot provide useful information on these funds?
Morningstar I view as a very good source of information. Information, not opinion. Past performance may not be a predictor of future performance. However it is necessary to look at past performance. I mean after all, none of us invested in "Apex Mid Cap Growth" because it had bad performance, right?
I really start with a different metric. How much has the manager invested in his own fund? That's easy to find out. What's harder is how much of that investment constitutes his net worth? That's harder. However sometimes it is easy, because of which I never invested in Bill Miller's funds. When one discloses he has 1M+ in his fund and NOT 10M+, but buys a 70M+ yacht, that tells me all I need to know.
Next I look at things like previous performance at older charges. Also look at how his fund(s) performed in good vs bad years. Also look at previous reports to see if he completely glorifies himself in good years but blames bad stock market for bad years. Needless to say it always help if manager communicates about why he buys a certain investment. No one can be right all the time, but for active management one at least has to have confidence manager is not a closet indexer.
Over period of time I have been gravitating only toward active management that view their funds as a "complete" or "only" investment or regardless of capitalization or asset. Such active management I can muster the courage to hold through thick and thin. It is said - dunno who - one has to give fund manager at least 10 if not 20 years for it to make a difference. Well, unless I really respect a fund family I have stopped buying "This Small Cap Fund" and "That Large Cap Fund" when it is obvious company is simply marketing to asset allocators rather than necessarily have special aptitude.
In my 401K I only use index funds since most active funds in 401ks in my opinion suck most intensely. You may occasionally find Fidelity Contra and Dodge & Cox in 401k, but to me it is imply not worth the effort in 401ks. "MY" funds I buy on weakness and hold on for dear life. FWIW its worth here are some funds I buy when my $0.99 crystal balls tells me to.
WGRNX AKREX APPLX BULLX AUXFX PVFIX JORDX FVALX
I have some MXXVX and CGMFX which I'm not actively buying. I had expressed opinion elsewhere about manager risk vs market risk. IMO it is worthwhile accepting manager risk in active funds only in above situations at large. No point otherwise and better to only accept market risk with index funds and not compound the problem. This after all is why most active fund managers cannot outperform index managers for the most part. With bonds, as you indicate it is even more difficult. I'm hopelessly bond challenged and have given up trying to figure how to invest in them.
It is public knowledge I'm invested in most Artisan and Bridgeway funds that I could and I have held them for a long time. I'm not adding and have no plans to add.
Good luck. Luck is what you need most, more than anything else. Just ask holders of FAIRX who bought in 2008 and sold in 2011.
OK..............the OTC head cold med is better than ever......... Good thing the investment boat is at anchor. What is the reference for the funds you noted in your post?
Thanks Vintage for sharing. I like the points you note in assessing a fund. I think you are saying that a good portion of your decision is based on behaviors of the Fund Manager, in additional to an all-cap/all-aspect investment domain. I too have seriously considered all your current holdings, but BULLX and JORDX.
Reply to @LarryH: The thing with magic is, if people know how you do the trick, they won't pay to see you do it. You could make an argument that the financial industries collects rent by making things complex. Okay, so yeah, they definitely do that.
Reply to @Charles: Yes. Active manager has to have conviction. That conviction is more believable when he has skin in the game. Unshackling manager from "large cap" vs "small cap" or "domestic" vs "international" leaves little room for manager to make excuses, and IMHO increases chances for success over longer period of time. "Longer period of time", the only way for investor to find out and have courage to hold on through thick and thin.
Forgot to add FMIRX, now PROVX and FPACX, DEFIX.
Needless to say one does not have to be rigid. I just put forth one argument for selecting funds. I invest in Bridgeway because of his charitable business development plan and Artisan initially by sheer accident and then happily later on, so I can pretend (now) I'm smart
Reply to @LarryH: There is no trick. These funds are getting exposure to equity markets through investments in derivatives (futures, options, swaps) and investing the collateral in an actively managed bond portfolio.
Comments
I once read a science fiction author who stated that if we encountered a race of people with vastly superior intelligence, it would appear they did things by magic. This is how I feel about how PIMCO actively manages their funds such as PAUDX. It appears to me they use tools that are far beyond my capabilities, i.e. their intelligence is vastly superior to mine.
My question is: If we don't understand fully a fund manager's investment techniques, how do we evaluate their funds for investments. Are we left with trust due to their past performance, do we look at returns and yield, other criteria? Will a Morningstar Snapshot provide useful information on these funds?
-- Larry
I really start with a different metric. How much has the manager invested in his own fund? That's easy to find out. What's harder is how much of that investment constitutes his net worth? That's harder. However sometimes it is easy, because of which I never invested in Bill Miller's funds. When one discloses he has 1M+ in his fund and NOT 10M+, but buys a 70M+ yacht, that tells me all I need to know.
Next I look at things like previous performance at older charges. Also look at how his fund(s) performed in good vs bad years. Also look at previous reports to see if he completely glorifies himself in good years but blames bad stock market for bad years. Needless to say it always help if manager communicates about why he buys a certain investment. No one can be right all the time, but for active management one at least has to have confidence manager is not a closet indexer.
Over period of time I have been gravitating only toward active management that view their funds as a "complete" or "only" investment or regardless of capitalization or asset. Such active management I can muster the courage to hold through thick and thin. It is said - dunno who - one has to give fund manager at least 10 if not 20 years for it to make a difference. Well, unless I really respect a fund family I have stopped buying "This Small Cap Fund" and "That Large Cap Fund" when it is obvious company is simply marketing to asset allocators rather than necessarily have special aptitude.
In my 401K I only use index funds since most active funds in 401ks in my opinion suck most intensely. You may occasionally find Fidelity Contra and Dodge & Cox in 401k, but to me it is imply not worth the effort in 401ks. "MY" funds I buy on weakness and hold on for dear life. FWIW its worth here are some funds I buy when my $0.99 crystal balls tells me to.
WGRNX
AKREX
APPLX
BULLX
AUXFX
PVFIX
JORDX
FVALX
I have some MXXVX and CGMFX which I'm not actively buying. I had expressed opinion elsewhere about manager risk vs market risk. IMO it is worthwhile accepting manager risk in active funds only in above situations at large. No point otherwise and better to only accept market risk with index funds and not compound the problem. This after all is why most active fund managers cannot outperform index managers for the most part. With bonds, as you indicate it is even more difficult. I'm hopelessly bond challenged and have given up trying to figure how to invest in them.
It is public knowledge I'm invested in most Artisan and Bridgeway funds that I could and I have held them for a long time. I'm not adding and have no plans to add.
Good luck. Luck is what you need most, more than anything else. Just ask holders of FAIRX who bought in 2008 and sold in 2011.
Fortunately for you, based upon your funds list for your 401k; your choices must be wide open.
99% of 401k's are so-so and continous barking dogs.
Take care,
Catch
Good thing the investment boat is at anchor.
What is the reference for the funds you noted in your post?
"MY" funds I buy on weakness and hold on for dear life. FWIW its worth here are some funds I buy when my $0.99 crystal balls tells me to.
MY => funds I own in taxable acocunt. Still no Whisky for you
Forgot to add FMIRX, now PROVX and FPACX, DEFIX.
Needless to say one does not have to be rigid. I just put forth one argument for selecting funds. I invest in Bridgeway because of his charitable business development plan and Artisan initially by sheer accident and then happily later on, so I can pretend (now) I'm smart