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I grew up in a different investing era, very different now

ron
edited August 2013 in Fund Discussions
Not that its good or bad, just read a lot now about how quickly investors become disappointed with results of funds in short periods and are quick to use new funds with no record. When I think back just 15 years or so that about only stock index fund I remember was S+P 500. in 1970's and now there are dozens a month being added to thousands. I used to think if a fund did not turn around mediocre performance within 3 years, time to change, now it only takes a few months or so. The increased discussion boards, press coverage, and mostly, the Internet has compressed years into weeks. Are we expecting too much in too short a time or are we now just able to make a correct judgement so quickly? Only time will tell, in just a few weeks. Just felt like babbling this morning before I decide what to buy or sell next week.

Comments

  • I fully agree with you. 3 months, or even 30 days have become norm these days, instead of at least 3 years.

    I give at least 3 years to the core funds that I have chosen. Even that is a small period for a manager to show results. Only a small portion of portfolio, I employ some kind of short term changes/trading.
  • Reply to @mrc70: Same here... have had the majority of our funds for years- try to use small positions for short-term changes.
  • edited August 2013
    Yep, Brave New World - or something to that effect. Would have been hard to imagine having so much information at one's fingertips back in the 60s. Recall spending hours and days at the university library pouring through rolls of old NYT "micro-film" doing research as a young undergrad. Wow! That was really hot technology back than.

    Not to miss your larger point: I think it may be a good argument for passive investing as advocated by (notably) MJG - but many others as well. As a partial solution, I tend more towards time-tested moderate allocation funds like PRWCX, OAKBX, or VWELX. The "tops" and "bottoms" are much easier to tolerate without the knee-jerk reactions more focused funds can cause.

    It's a highly informed group here at MFO --- So, If you can invest in the more volatile funds and successfully use their sharp fluctuations to your advantage (through strategic buying and selling), than go for it. I'm afraid, however, 90% of he investing public comes out on the short-end when they engage in frequent buying and selling.
  • Right.

    In the 70's, front loads were 8%. That provided a lot of motivation to stick with a fund for the long term.

    What a racket!

    I think the expectation for funds should be same as Ben Graham wrote about for investing in general: safety of principal and satisfactory return.

    The former is absolute, the latter is relative, and both are framed by an investor's time horizon and risk temperament, or should be.

    But at the end of the day, portfolio managers and fund companies must instill confidence with their investors that they will deliver both, or risk losing their business.

    I suspect that is harder to do today than ever before, as it probably should be.
  • edited August 2013
    Reply to @Charles: Good point - Friend's dad (late 60s) was a school bus driver by day. But, in his off-hours was making a killing selling mutual funds. Lived damned well!
  • Reply to @hank
    Even hotter technology from the '60's was the good ol' newspaper spread out on the dining room table where you'd find what your stocks did yesterday (or maybe last Friday), so you could run down to Merrill Lynch or your bank and pay those lovely commissions:)
  • Some good points made here. I think one of the traps we fall into, my self included, is the search for the ultimate fund that has a gimmick that proclaims to do well in up and down markets - that alternative fund. It gets ballyhooed here on MFO while it's in style. Then we find out whoops, it's not working like I thought. Lets take ARIVX, PAUDX, AQRIX for example. How many of us have bailed on one or more of those in the last few months? I remember back in 2008 there being a lot of talk about the Hussman fund, HSTRX. Not much talk anymore and probably not held by many here. Could other alternatives like the White Box funds and Marketfield be the next funds to dump when things aren't playing out like we thought? Probably.

    I like what Hank said about sticking with tried and true funds like PRWCX. Nothing flashy or gimmicky, just steady-eddie over the test of time.

    All that said, I'm still searching. At least with a small percentage of my portfolio. I still own RGHVX, will I never learn...:)
  • Reply to @hawkmountain: Beginning to sound like an old geezers club here... the younger folks are probably wondering what the heck we are talking about. Stock prices from newspapers?:-)
  • edited August 2013
    Reply to @Old_Joe: Yes - but we could relate better to terms like taking a "close shave" or getting our "clock cleaned" by an investment.
  • edited August 2013
    It's a very different investing environment than it was 10-20 years ago. It wasn't THAT long ago that if you wanted to sell something you had to call your broker and during that time you could think about it, maybe not give into emotion and hang up. Then you could buy and sell online, but you had to be at a computer. Now, people have their phone and they can sell or buy anywhere. Everyone can post their own thoughts, anyone has to-the-moment access to articles and statistics (charts, etc.) People's time horizon is now vastly shorter - the average holding period of a stock is something like a week now versus years decades ago.
  • MJG
    edited August 2013
    Hi Guys,

    I agree with everyone else. That could be a danger signal.

    I’m not sure that is an entirely good thing. Are we going along to get along? Are we victims of groupthink?

    No, the marketplace dynamic changes are dramatic and real. They definitely influence the way we think, react, and make investment decisions. There are both positive and negative aspects to that changing environment.

    I vividly remember when in the early 1950s I walked into a Merrill-Lynch small town trading office in New Jersey. The large room was filled with cigar smoke generated by a large number of overweight men puffing away time and their health. Occupying one complete wall was a blackboard with stock prices. This imposing board was kept current by a young man with chalk in hand. I think I bought an odd lot of Chock-Full-of-Nuts stock on that day.

    Indeed, thinks have changed. For years I monitored my investment performance and screened candidate stocks by charting with pencil and graph paper. Talk about an error prone system. No need for any of those distractions today.

    The technology has made investing painless, efficient, and far less costly, especially with regard to recovering the initial buy-in cost drag. But some of these technology benefits are wasted by imprudent application of them and by wealth eroding personal behavioral biases. Presently, we are in a position of having an excess of market data and advice. How do we process all that stuff?

    Our decision making can be swamped by an overload of information. Absorbing, sorting, and intelligently processing this overload is a daunting task. For the past few years, I have completely stopped watching the numerous business TV channels that I can access. I simply do not do so.

    All the information flow, coupled often with breathless advice from proclaimed market wizards, encourages trading. The data shows that stock holding periods for both individual investors and mutual funds have decayed over time. Academic research has demonstrated time-and-time again that “trading is hazardous to your wealth. Yet we do it.

    I am not totally immune to these trading pressures. I combat that natural proclivity by attempting to isolate myself from the constant news barrage. I currently subscribe to both the WSJ and Barron’s. When the Barron’s subscription runs its course, I plan not to renew it.

    Over time, I evaluate my net portfolio worth less and less frequently. The last time that I checked my portfolio’s value was at mid-year. I’ll likely examine it in detail again sometimes in November when I’ll do a year-end asset allocation adjustment. This casual approach is only possible because I own mutual funds that I trust; they are slow to change their overall investment strategy. This would not be possible if I assembled my own private stock portfolio which would demand much more diligent monitoring.

    Investment costs are down, the need to trade frequently is down, the information is more accurate, more transparent, and more easily accessed if you selectively sort wisely, the frauds and hucksters are more readily identified, and the market dynamics are better understood these days. The obvious secret is to organize your investment philosophy and plan to take advantage of these technology and organizational leaps.

    There is far less stress for me today than when I invested in the 1950s, the 1960s, and the 1970s. I’m a slow learner. I began to better understand the equity marketplace in the 1080s when I was introduced to mutual funds. Things have only gotten better for me as I embraced, exploited, but resisted the temptation traps offered by our evolving high tech market milieu.

    I fondly recall my earlier investing experiences (and misadventures ), but today that process is less costly, more decisive, and more easily executed when a little discipline is enforced. Simplicity works. The potential time savings are enormous. That’s the most significant benefit of all.

    I enjoyed all of your observations.

    Best Wishes.
  • Reply to @scott: How true! There is almost too much information at one's finger tip that reinforces the tendency of performance chasing , myself included. Over the long term this is not helpful for one to reach his/her long term goals.
  • Professional money managers are-to me, just like professional athletes. When you are hot, you are in. When are less hot or lukewarm, you are under watched. If you are cold, you are dumped in no time. I believe it has a lot to do with Internet and access of up to date information. You are good managers as long as you produce the numbers. No one wants yesterday Hero. Good or bad, I do not know. That is the trend it is going,. Fast and furious.
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