THOUGHTS????????????????????????????????????????????????????????????????????????????????????????????

[Michael.Felli]

...What is a fiduciary, and what happened to the business?

The fiduciary is one who is entrusted with the responsibility, in this case the assets of others, and the duty of a fiduciary is to put the interest of those persons for whom he is running the money first before his own.

And that’s a contractual agreement.

It’s not quite a contractual agreement, but it is certainly a mutual understanding and absolutely consistent with what the Investment Company Act of 1940 — our guiding statute in the fund business — says, which is the interest of mutual fund shareholders must be placed ahead of the interest of fund trustees, managers, officers and directors and distributors. And that’s not happening.

http://www.pbs.org/wgbh/pages/front...the-train-wreck-awaiting-american-retirement/

 

[LionJim]

...What is a fiduciary, and what happened to the business?

The fiduciary is one who is entrusted with the responsibility, in this case the assets of others, and the duty of a fiduciary is to put the interest of those persons for whom he is running the money first before his own.

And that’s a contractual agreement.

It’s not quite a contractual agreement, but it is certainly a mutual understanding and absolutely consistent with what the Investment Company Act of 1940 — our guiding statute in the fund business — says, which is the interest of mutual fund shareholders must be placed ahead of the interest of fund trustees, managers, officers and directors and distributors. And that’s not happening.

http://www.pbs.org/wgbh/pages/front...the-train-wreck-awaiting-american-retirement/

No, it's not happening, isn't going to happen anytime soon, and "train-wreck" is an understatement. And it's not the only problem, does "infrastructure" ring a bell? DMV has been having a spate of water-main breaks lately, one right after the other. The $$$$$$$$$$$$$$$$$$ needed to fix? Wow, way out there. Gonna be ugly.

 

[LionDeNittany]

It is impossible for someone to put the interest of a person for whom they are running money before their own

The interests can at best be aligned

 

[Ten Thousan Marbles]

It is impossible for someone to put the interest of a person for whom they are running money before their own

The interests can at best be aligned

The interest of a person they are running the money comes in 3rd or 4th, at best. Depending on the person, family and golf come in anywhere second thru 4th.

 

[mn78psu83]

...What is a fiduciary, and what happened to the business?

The fiduciary is one who is entrusted with the responsibility, in this case the assets of others, and the duty of a fiduciary is to put the interest of those persons for whom he is running the money first before his own.

And that’s a contractual agreement.

It’s not quite a contractual agreement, but it is certainly a mutual understanding and absolutely consistent with what the Investment Company Act of 1940 — our guiding statute in the fund business — says, which is the interest of mutual fund shareholders must be placed ahead of the interest of fund trustees, managers, officers and directors and distributors. And that’s not happening.

http://www.pbs.org/wgbh/pages/front...the-train-wreck-awaiting-american-retirement/

Yep. And we're all gonna die too - broke. Just kidding. Kinda.

Anyway, I was just talking to a friend yesterday about due diligence and the like. He happens to be a solid investor with a good record. The conversation turned to brokerages and I told him a story from my days in the business. I was included in a group of about 6 people who had the honor to listen to one of our top fund managers speak to us one Friday afternoon in the summer of 2001. The fund he managed was a Large-Cap "Value" fund and the firm we worked for was one of the two biggies. He told us that he and his co-manager had previously held a large (outsized) position in Lucent Technologies (now Alcatel-Lucent). In Sept. of 2000 Lucent hit the stratosphere - mid 80s or so. At the time he was speaking to us it was in the teens. He told us that when Lucent had dropped to around 40 or so in the winter of 2001 that he and his co-manger were ready to double down, until he walked into a bar one evening where he chanced upon one of the firms top bond analysts. He knew the desk traded a lot of Lucent bonds and decided to ask him for his boring opinion. He said something like, "Lucent has taken a big hit and we're going to double down on it. What do you think?" The bond analyst looked up at him blankly and said, "Have you ever read their balance sheet?" Answer, "Well, not lately. Just think it's a good company." To which the bond analyst replied, "They could go bankrupt within a couple of months. Don't do it." They didn't do it. They even reduced their position. Good thing. By the fall of 2002 the stock was less than $4.00. I couldn't believe he told us that story. I was gobsmacked.

The last bit of advice the fund manager imparted to us before zipping back to Manhattan was along these lines, "Those guys from Tyco are the most hardworking and honest guys we deal with. I recommend that stock above all of the others we hold. You can buy it till the cows come home." I kid you not.

Roll them dice! Actually, do your own due diligence.

 

[joedirt47]

THOUGHTS?

I'm not going to read anything after the third redundant question mark.
Does 80 question marks make the question more important? Or more questioning?

 

[sluggo72]

hmmm from reading this I learned, if I buy an index fund, (and talk about a fiduciary, he's selling index funds because that's what he sells?? no conflict there), I have a 0% chance of beating the market, or said another way I have a 100% chance of under performing the market. I'll rush right in!!!

 

[sluggo72]

Yep. And we're all gonna die too - broke. Just kidding. Kinda.

Anyway, I was just talking to a friend yesterday about due diligence and the like. He happens to be a solid investor with a good record. The conversation turned to brokerages and I told him a story from my days in the business. I was included in a group of about 6 people who had the honor to listen to one of our top fund managers speak to us one Friday afternoon in the summer of 2001. The fund he managed was a Mid-Cap "Value" fund and the firm we worked for was one of the two biggies. He told us that he and his co-manager had previously held a large (outsized) position in Lucent Technologies (now Alcatel-Lucent). In Sept. of 2000 Lucent hit the stratosphere - mid 80s or so. At the time he was speaking to us it was in the teens. He told us that when Lucent had dropped to around 40 or so in the winter of 2001 that he and his co-manger were ready to double down, until he walked into a bar one evening where he chanced upon one of the firms top bond analysts. He knew the desk traded a lot of Lucent bonds and decided to ask him for his boring opinion. He said something like, "Lucent has taken a big hit and we're going to double down on it. What do you think?" The bond analyst looked up at him blankly and said, "Have you ever read their balance sheet?" Answer, "Well, not lately. Just think it's a good company." To which the bond analyst replied, "They could go bankrupt within a couple of months. Don't do it." They didn't do it. They even reduced their position. Good thing. By the fall of 2002 the stock was less than $4.00. I couldn't believe he told us that story. I was gobsmacked.

The last bit of advice the fund manager imparted to us before zipping back to Manhattan was along these lines, "Those guys from Tyco are the most hardworking and honest guys we deal with. I recommend that stock above all of the others we hold. You can buy it till the cows come home." I kid you not.

Roll them dice! Actually, do your own due diligence.

if they were Mid Cap value mangers, why would they be in either stock, which was the real question you should have asked.

 

[mn78psu83]

if they were Mid Cap value mangers, why would they be in either stock, which was the real question you should have asked.

Good call. It was a Large Cap Value fund. I have mid cap on my mind for a different reason and it was a long post. Edit made. Thanks.

 

[sluggo72]

Actually, good call. It was a Large Cap Value fund. I have mid cap on my mind for a different reason and it was a long post. . Edit made.

makes it worse, both of those stocks at the time, I would consider large cap growth stocks. but that's a debate for another day.

 

[mn78psu83]

makes it worse, both of those stocks at the time, I would consider large cap growth stocks. but that's a debate for another day.

I hear ya.

 

[kgilbert78]

hmmm from reading this I learned, if I buy an index fund, (and talk about a fiduciary, he's selling index funds because that's what he sells?? no conflict there), I have a 0% chance of beating the market, or said another way I have a 100% chance of under performing the market. I'll rush right in!!!

No, an index fund matches the market. That's the whole idea of them anyway. As a result you do not have to pay a manager commissions to gamble with your money. There's big savings there.

I recall when Magellan was the "sure thing". Had a great manager and good track record. But they had too may people buy it, the manager went on to other things, and in the end, it was a dog--to the point where my company removed it as an investment choice. Over 20-25 years, the basic investment (like a money market) they had did better. If you got in early, you did ok... But that's the trick.

 

[sluggo72]

No, an index fund matches the market. That's the whole idea of them anyway. As a result you do not have to pay a manager commissions to gamble with your money. There's big savings there.

I recall when Magellan was the "sure thing". Had a great manager and good track record. But they had too may people buy it, the manager went on to other things, and in the end, it was a dog--to the point where my company removed it as an investment choice. Over 20-25 years, the basic investment (like a money market) they had did better. If you got in early, you did ok... But that's the trick.

By definition an index fund can not match the market( they have fees you know ) so if they match .their return will be less . if they beat run. They aren't an index fund. Btw which index???

 

[jj410]

...What is a fiduciary, and what happened to the business?

The fiduciary is one who is entrusted with the responsibility, in this case the assets of others, and the duty of a fiduciary is to put the interest of those persons for whom he is running the money first before his own.

And that’s a contractual agreement.

It’s not quite a contractual agreement, but it is certainly a mutual understanding and absolutely consistent with what the Investment Company Act of 1940 — our guiding statute in the fund business — says, which is the interest of mutual fund shareholders must be placed ahead of the interest of fund trustees, managers, officers and directors and distributors. And that’s not happening.

http://www.pbs.org/wgbh/pages/front...the-train-wreck-awaiting-american-retirement/

Bogle is the only honest man within smelling distance of Wall Street.
The "financial industry" consists of high-paid parasites and criminals, sucking the blood out of the American economy. Mutual funds are the least of the problems - they are better than all the crooked idiot brokers on commission.

 

[kgilbert78]

By definition an index fund can not match the market( they have fees you know ) so if they match .their return will be less . if they beat run. They aren't an index fund. Btw which index???

Good ones have very small fees.... Not to go into details, but I've has a number of discussions with my brother (PSU '82 and a CPA) on it.... His recommendation.

A non-index fund has to (a) beat the market (many/most do not) and (b) beat it well enough to pay for the added higher fees. And you have to guess which one will do that.

 

[sluggo72]

S

Good ones have very small fees.... Not to go into details, but I've has a number of discussions with my brother (PSU '82 and a CPA) on it.... His recommendation.

A non-index fund has to (a) beat the market (many/most do not) and (b) beat it well enough to pay for the added higher fees. And you have to guess which one will do that.

so said another way they ( index funds) are guaranteed to under perform

 

[kgilbert78]

S

so said another way they ( index funds) are guaranteed to under perform

If you purchased the stock in that fund individually, you'd still be paying a commission--and the big guys probably get a bulk discount that you would not get. There's a commission on *everything*.

In my case, with an index fund, the charge is 40 cents. Per grand. So I get 99.96% of the market. If that's underperforming, well.....

Fidelity Puritan, which is a five star fund, has a cost of $4.60 per grand. That means you start out automatically losing 0.4% per year.

YTD? 9.75%
Vanguard's main index fund? 11.19.%

Mind you, Puritan has some bond money in it for safety. It's part of my portfolio. But not the main part.

 

[Art]

S

so said another way they ( index funds) are guaranteed to under perform

Not necessarily, they could over-perform or match, but are more than likely to under-perform compared to the index. An index fund with a good tracking algorithm shouldn't be that far off.

 

[sluggo72]

Not necessarily, they could over-perform or match, but are more than likely to under-perform compared to the index. An index fund with a good tracking algorithm shouldn't be that far off.

If they over perform Run. They aren't an index fund if they match same thing.

 

[Art]

If they over perform Run. They aren't an index fund if they match same thing.

Really? All it means is that the fund/ETF may have had a problem with its weighting algorithm. One would expect that to be negated over time, but if not it's still a matter of degree. Hard to argue that a fund that is consistently within 0.05-0.10% (before expenses) of the S & P 500 isn't tracking that index.

Reality, though, is that funds have to buy, sell, and hold stocks, all of which incur expenses. Indices don't.

Investors have a myriad of options to achieve their financial objectives. If those objectives are to simply beat market indices, then they'd better rethink them.

 

[sluggo72]

Just what I want my index fund to be overweighted in Enron at the wrong time!!! Really index funds do the opposite of what most prudent investors do. Index funds but high and sell low. They get overweighted in a few stocks. That's how indices work

 

[Ski]

THOUGHTS????????????????????????????????????????????????????????????????????????????????????????????

Congrats! Your first ones!

 

[Doc-M]

Perfect! Both of my hobbies and interests, financial markets and Lions, appear on the same Board. Love it!

Upfront, I am a value investor, investing in dividend paying stocks. I am always looking for a growth company to infuse risk in my portfolio. I miss big growth opportunities due to my conservative orientation.

Right now, one should watch Energy ETF (symbol XLE) to bottom out and then bet the farm on it. Or better yet keep on accumulating shares CVX, XOM, and RDS-B slowly and slowly till all the cash including borrowed money is invested.

Big banks BAC, C, JPM, WFC, ... were a big bargain circa '08 and '09. You would be laughing to the bank if you followed aforementioned strategy. If you can, manage your own hard earned money.

If you do not have time to buy individual stocks, pick a large cap, mid cap, and small cap mutual funds offered by Fidelity, Vanguad, Schwab, ... and keep on investing. Put more in mid cap and small cap if you are young. I can offer more formulaic approach if needed.

LionJim, I may have seen you hanging around McAllister during your student days with your head banged up trying to understand Grothendieck Spectral Sequence.

 

[roswelllion]

Well your 80 ?'s makes the article appear more interfesting than it really was.
Four takeaways
. an index fund is better than an actively managed fund with fees. - I happen to agree with Bogle but that is an age old argument.
. Social security is going broke unless it gets "tinkered with" duh!!
. Defined benefit plans are going broke because they all have 8% return built into there assumptions. - another duh, although a little more subtle. [ I would say most of these assumptions with 8% return also ,have 4.5% inflation "built in" which also isn't happening.
. Financial analysts are generally greedy no nothings who follow the herd. another duh.

Accurate article but pretty boring for an 80 ? title.

 

[kgilbert78]

Just what I want my index fund to be overweighted in Enron at the wrong time!!! Really index funds do the opposite of what most prudent investors do. Index funds but high and sell low. They get overweighted in a few stocks. That's how indices work

Boy, you really do not understand what an index fund is....

 

[sluggo72]

Boy, you really do not understand what an index fund is....

lol then explain to me how an index works?? take like the S&P 500, when did Enron get kicked out of the S& P 500 ( and therefore sold by index fund) at its high? or when they went under??
How about the above mention Lucent?? When did they exit the index (and therefore the index fund)? at the high or their low?? What about WorldCom??

The only way an index fund can out perform the index, is to overweight/underweight the stocks in the index, but isn't that really actively managing??

I think you better go back and review how an index fund works.

go back and look at the S & P 500 circa 2000, all the performance came from 5 stocks , and they were the most heavily weighted in the index.

You do know the S&P500 is a market cap weighted index don't you?? and what that means?? (and therefore your index fund)

 

[kgilbert78]

lol then explain to me how an index works?? take like the S&P 500, when did Enron get kicked out of the S& P 500 ( and therefore sold by index fund) at its high? or when they went under??
How about the above mention Lucent?? When did they exit the index (and therefore the index fund)? at the high or their low?? What about WorldCom??

The only way an index fund can out perform the index, is to overweight/underweight the stocks in the index, but isn't that really actively managing??

I think you better go back and review how an index fund works.

go back and look at the S & P 500 circa 2000, all the performance came from 5 stocks , and they were the most heavily weighted in the index.

You do know the S&P500 is a market cap weighted index don't you?? and what that means?? (and therefore your index fund)

I wish you luck with your investments. Each has to decide their level of risk and comfort they are willing to accept.

 

[jj410]

lol then explain to me how an index works?? take like the S&P 500, when did Enron get kicked out of the S& P 500 ( and therefore sold by index fund) at its high? or when they went under??
How about the above mention Lucent?? When did they exit the index (and therefore the index fund)? at the high or their low?? What about WorldCom??

The only way an index fund can out perform the index, is to overweight/underweight the stocks in the index, but isn't that really actively managing??

I think you better go back and review how an index fund works.

)

Uh, no. I think YOU better go back and review it.
A properly managed index fund by definition outperforms the average investor and active fund by reducing management expenses and fees generated by turnover. The only argument for active investing is that you can outperform the average investor, after expenses.
Who is more likely to make more money, the house, which takes a percentage, or the average gambler, who has to finance that percentage? By being the gambler instead of the house, you are betting you will beat the average gambler plus the house percentage edge.

 

[mn78psu83]

Uh, no. I think YOU better go back and review it.
A properly managed index fund by definition outperforms the average investor and active fund by reducing management expenses and fees generated by turnover. The only argument for active investing is that you can outperform the average investor, after expenses.
Who is more likely to make more money, the house, which takes a percentage, or the average gambler, who has to finance that percentage? By being the gambler instead of the house, you are betting you will beat the average gambler plus the house percentage edge.

Who is more likely to make more money, the house, which takes a percentage, or the average gambler, who has to finance that percentage?

This is the crux of the biscuit - the apostrophe.

 

[sluggo72]

.

Uh, no. I think YOU better go back and review it.
A properly managed index fund by definition outperforms the average investor and active fund by reducing management expenses and fees generated by turnover. The only argument for active investing is that you can outperform the average investor, after expenses.
Who is more likely to make more money, the house, which takes a percentage, or the average gambler, who has to finance that percentage? By being the gambler instead of the house, you are betting you will beat the average gambler plus the house percentage edge.

thanks I went back and reviewed , what I found is this:

in 11/ 1992 I put approximately $5000 ( $4974.13) into something called the Investment Company of America and as of 7/31/15 it was worth $41.207 after paying all those fees and expenses etc
I looked into the Van Guard SP 500 fund (you know from Boogles company with those low fees and expenses) and asked them if I had put $5000 in that fund, reinvested all the dividends and cap gains etc what would I have as of 7/31/2015. Well low and behold it is $38,640 !!! That's a difference of over $2500!!! More that I have!!!

so now I am really confused, as it does not long like 'A properly managed index fund by definition outperformed the average investor and active fund by reducing management expenses and fees generated by turnover'. Do you think this manager actually earned his fee?? And then some? Could that be possible??

FWIW this isn't some random fund I choose, its one I own.