Vanguard investing options in market downturn

Prism

Sailtheworld wrote: »

It's not the truth of the matter I have an issue with but the assertion that this makes it easy to pick the losers (or winners). Unless it's a truth known only to a select few it doesn't add value.

It's easily demonstrated too by a quick Google. Dow Jones research from earlier this year..

64% of large cap funds underperformed the S&P over 1 year, 85.1% over 10 years and 91.6% over 15 years.

Thats likely because most funds don't even try very hard. Quote happy to skirt under the index not taking risks and taking fees. Then there are the funds that actually have an active approach.

Sailtheworld

Prism wrote: »

Thats likely because most funds don't even try very hard. Quote happy to skirt under the index not taking risks and taking fees. Then there are the funds that actually have an active approach.

I think the idea that losers are easy to avoid but most fund managers pick them anyway would test most people's credulity.

Prism

Sailtheworld wrote: »

I think the idea that losers are easy to avoid but most fund managers pick them anyway would test most people's credulity.

I think the idea that loser funds are easy to avoid but most retail investors pick them anyway completely understandable. And if the average investor can't why should the fund managers try.

The fund industry seems full of income and value investors who specifically look for the losers in the belief that they know better. Sometimes it works but it hasn't for a while.

sendu

Prism wrote: »

Thats likely because most funds don't even try very hard. Quote happy to skirt under the index not taking risks and taking fees. Then there are the funds that actually have an active approach.

I think you're just pulling his chain now. If this is meant sincerely, then there were be funds that consistently do well over long time lines.

But not only do active funds not do well in aggregate over time, the top performing funds are always different each year. (With arguable exception of literally 1-3 funds, but they haven't been around long enough to be sure it's not just chance.)

Which means either everyone is lazy, or everyone is incompetent. As a practical concern, it doesn't matter which.

Prism

sendu wrote: »

I think you're just pulling his chain now. If this is meant sincerely, then there were be funds that consistently do well over long time lines.

Maybe I am a little, but some funds have done very well for a long time and have been popular for a long time too. Sure, they may track the index for a few years (not a problem) but they don't all fall of a cliff after a while. Lets take an obvious one Fundsmith, which is based on Morgan Stanley Global Brands, which in turn is based on a Morgan Stanley active investment method developed in the 90's. Oh and fundamentally the whole thing comes from Buffett. There is not one time period since then that I wouldn't have been happy to hold any of those active funds.

Other examples include some very old defensive investment trusts which have created fantastic returns for people with their ability to adapt to crashes and downturns.

bostonerimus

It seems to me that filtering out the losers and keeping the winners over a lifetime of investing requires something like the Sports Almanac from Back to the Future.

sendu

Prism wrote: »

Lets take an obvious one Fundsmith, which is based on Morgan Stanley Global Brands, which in turn is based on a Morgan Stanley active investment method developed in the 90's. Oh and fundamentally the whole thing comes from Buffett. There is not one time period since then that I wouldn't have been happy to hold any of those active funds.

Fundsmith and BRKB being amongst the 1-3 exceptional funds I alluded to.

What's your opinion on buying in to Fundsmith today?

Since you brought up the laziness factor, I've seen comments that Terry doesn't need to care anymore, and is doing questionable things. And what happens when the managers die? How do you predict their deaths in order to time your exit just right?

Prism

sendu wrote: »

Fundsmith and BRKB being amongst the 1-3 exceptional funds I alluded to.

What's your opinion on buying in to Fundsmith today?

I would have no hesitation buying more except for the fact that I have enough in that global large cap pot (50%) so for the moment at least all the new money is going into other stuff (including Smithson)

Since you brought up the laziness factor, I've seen comments that Terry doesn't need to care anymore, and is doing questionable things. And what happens when the managers die? How do you predict their deaths in order to time your exit just right?

You don't need to. Terry Smith didn't invent this style so it shouldn't make any difference at least in the short term should he step back for any reason. I have no idea what the questionable things are. In the last couple of years he has bought a healthcare company, a staples one and a tech one - seems pretty normal to me.

sendu

Prism wrote: »

You don't need to. Terry Smith didn't invent this style so it shouldn't make any difference at least in the short term should he step back for any reason.

While it's true that the strategy of that fund seems sound and could be carried on by anyone, don't you think that the general public at large that invest in the fund simply because of the manager or the past high returns would all sell on his death? Can they really be trusted not to do something stupid? Would the fund then ever recover? I don't think it's easy to judge.

Prism

sendu wrote: »

While it's true that the strategy of that fund seems sound and could be carried on by anyone, don't you think that the general public at large that invest in the fund simply because of the manager or the past high returns would all sell on his death? Can they really be trusted not to do something stupid? Would the fund then ever recover? I don't think it's easy to judge.

So lets say they did I don't imagine it would have much of an effect on the current value of the fund. The fund is stated to have a 7 day liquidity of 58%. The means selling around 10bn of stock. The companies it invests in are huge. The daily trading volume for Microsoft is around $3 billion a day. Plenty of time to make a decision about if what remains is still worth investing in.