How do you pick funds - REALLY!

125 replies [Last post]
troll's picture
Offline
Joined: 2004-11-29

Bobby Hull wrote:AllREIT wrote: Ashland wrote:C'mon boys... good natured jabbing is OK. This personal s*it has got to stop.Why do people respond to Bobby? Why hasn't forum mod banned him?
I'm usually good for a month or so before I get banned. Then I come back as someone else. I won't be hard to spot when I come back and then we start the cycle all over, again. Why don't you pick out your next screen name now and share it with us, say like "Barclay Plager", so we will know it is you!

troll's picture
Offline
Joined: 2004-11-29

joedabrkr wrote: Bobby Hull wrote:
AllREIT wrote: Ashland wrote:C'mon boys... good natured jabbing is OK. This personal s*it has got to stop.Why do people respond to Bobby? Why hasn't forum mod banned him?
I'm usually good for a month or so before I get banned. Then I come back as someone else. I won't be hard to spot when I come back and then we start the cycle all over, again.
Why don't you pick out your next screen name now and share it with us, say like "Barclay Plager", so we will know it is you!
Keep an eye out for "joedapolesmoker."

The Judge's picture
Offline
Joined: 2006-06-06

His next screen name will be "Stu Grimson" (aka The Grim Reaper).  Keeps with the Chicago Blackhawk theme and correctly identifies what he is doing with regard to the investment options that are in the clients' best interest:
Killing them.

troll's picture
Offline
Joined: 2004-11-29

The Judge wrote:
His next screen name will be "Stu Grimson" (aka The Grim Reaper).  Keeps with the Chicago Blackhawk theme and correctly identifies what he is doing with regard to the investment options that are in the clients' best interest:
Killing them.

Actually, I was thinking of using "Stan Mikita."

The Judge's picture
Offline
Joined: 2006-06-06

Nah.  Although both were instrumental as far as today's NHL goes.  Story has it that Mikita had his stick get caught in a door and "bend" the blade.  He discovered the bended/curved blade made the puck to crazy things (i.e. drop, curve, etc).  He stuck with it and today you have all different sorts of curves.  In addition, apparently Bobby Hull was clocked at 118 mph on his slapshot.  Never been equaled.  The Golden Jet.....
Hope you had an opportunity to see a game at the old Chicago Stadium.  I wish I would have.  Must of been exceptional.
P.S. Please send me a pizza from the original Uno's; now that's good pizza.

troll's picture
Offline
Joined: 2004-11-29

The Judge wrote:
Nah.  Although both were instrumental as far as today's NHL goes.  Story has it that Mikita had his stick get caught in a door and "bend" the blade.  He discovered the bended/curved blade made the puck to crazy things (i.e. drop, curve, etc).  He stuck with it and today you have all different sorts of curves.  In addition, apparently Bobby Hull was clocked at 118 mph on his slapshot.  Never been equaled.  The Golden Jet.....
Hope you had an opportunity to see a game at the old Chicago Stadium.  I wish I would have.  Must of been exceptional.
P.S. Please send me a pizza from the original Uno's; now that's good pizza.

We had season tickets in the late 60's and 70's. The roar during the national anthem never failed to leave me with goose bumps on my arms. I still can't believe it's gone.
The Silo, in Lake Bluff, is the best pizza I've ever eaten. Even better than Uno's.

hoopfan's picture
Offline
Joined: 2007-03-22

I prefer the dart board method.

drewski803's picture
Offline
Joined: 2007-05-08

I have picked a set of managers who have strong, lengthy tenure.  For the majority of my clients, I use c-shares.  I use SMA's for the larger clients.  I take about 5% of the portfolio and leave it to 'tactical' allocation, whereby I take advantage of proprietary research using ETF's, structured products, etc.
I turned a prospect away on Wednesday because he had a 300m portfolio that was very well put together using no-load funds and individual bonds.  I don't look to do business with people who can do it for themselves. 
I think we can all agree that only a very small percentage of all investors could invest for themselves and achieve even close to market returns buying individual securities and even, yes, ETF's (commissions, b/a spreads, taxes, emotion, etc.)  [1984-2004, average investor: 5.3% return, institutional investor, 12.x% return, average stock fund 13.x% return, needs a citation]  Similarly, I believe we can all agree that as a whole, financial products are a good thing (if not, I'd suggest you exit the business). 
Boast passive management all you want, but I think we all know that there isn't such an animal as a 'passively managed' index.  Moreover, attaching a 1% wrap fee to an ETF doesn't make you any better than a portfolio manager who consistently laggs his index by 1.2%.
 
burn me

AllREIT's picture
Offline
Joined: 2006-12-16

drewski803 wrote:Boast passive management all you want, but I think we all know that there isn't such an animal as a 'passively managed' index.
No such thing as a 'passively managed' index? Pray that you explain this?
Quote: Moreover, attaching a 1% wrap fee to an ETF doesn't make you
any better than a portfolio manager who consistently laggs his index by
1.2%.

Sure it does, because the lag is capped to 1.2% vs an active manager who could lag the index by a much greater amount.

drewski803's picture
Offline
Joined: 2007-05-08

AllREIT wrote: drewski803 wrote:
Boast passive management all you want, but I think we all know that there isn't such an animal as a 'passively managed' index.
No such thing as a 'passively managed' index? Pray that you explain this?
It is important to remember that the index is not entirely passive: it does change over time. although a great deal of care goes into the selection of the index, it nevertheless represents a specific view of the market. For example, in the effort to be representative, there is an inevitable tendency to include "newer' industries in an index. These industries tend however to be more actively traded and often have higher price-earnings ratios than more established industries. The consequence of modifying the index to include these industries is therefore to exaggerate increases in the value of the index, and distort the picture of the broader market. 
-The Mutual Fund Bible
Quote: Moreover, attaching a 1% wrap fee to an ETF doesn't make you any better than a portfolio manager who consistently laggs his index by 1.2%.
Sure it does, because the lag is capped to 1.2% vs an active manager who could lag the index by a much greater amount.
I'm more concerned about keeping my clients in the market because I believe the long-term ownership of stocks is the correct strategy.  To do so, I must limit their downside.  We know that to cover redemptions, mutual funds typically have a cash component, and thus tend to out-perform indexes in down markets.  If I can show my clients that my funds are beating the indexes when they are down, they are more likely to not jump-ship.  Also, as He puts it:
“Two rules:1. Preserve the principal2. When in doubt see Rule #1”
Good luck with your SPDR over the next 12 months.

AllREIT's picture
Offline
Joined: 2006-12-16

drewski803 wrote:No such thing as a 'passively managed' index? Pray that you explain this?
It is important to remember that the index is
not entirely passive: it does change over time. although a great deal
of care goes into the selection of the index, it nevertheless
represents a specific view of the market. For example, in the effort to
be representative, there is an inevitable tendency to include "newer'
industries in an index. These industries tend however to be more
actively traded and often have higher price-earnings ratios than more
established industries. The consequence of modifying the index to
include these industries is therefore to exaggerate increases in the
value of the index, and distort the picture of the broader
market. 
-The Mutual Fund Bible

As I see it, the Mutual Fund Bible doesn't have a prayer. But then active management is an act of faith, so it makes sense to have a bible.

Fundamentally an index is a deterministic set of stocks and
weightings that are selected based on a set of fixed rules. E.g Russell
1K, Wilshire 5000, Morningstar large cap value, S&P Dividend
aristocrats,

Some (although they tend to be the most notable indexes) are set up by committee. E.g The S&P 500 and DJIA.

Newer older etc, all depends on how the index rules are set. Some
indexes strive to represent the market (Russell/Wilshire/M*/MSCI) and
so include the good/bad and indifferent of the market. Because that is what it is.

Others like the S&P Dividend Aristocrats (50 highest yeilding
Companies that have raised dividends for at least 25 years) aren't
going to have anything New in them.

Quote:Quote: Moreover, attaching a 1% wrap fee to an ETF doesn't
make you any better than a portfolio manager who consistently laggs his
index by 1.2%.
Sure it does, because the lag is capped to 1.2% vs an active manager who could lag the index by a much greater amount.
I'm more concerned about keeping my clients in
the market because I believe the long-term ownership of stocks is the
correct strategy.  To do so, I must limit their downside.  We
know that to cover redemptions, mutual funds typically have a cash
component, and thus tend to out-perform indexes in down markets.

Which you can do exactly the same thing by keeping 5% of the account in cash and the remainder in the market.

Also maybe the mutual funds's stock
picking and expense ratio cause it to lag more than a passive index
after adjusting for cash balances, which is typical of most mutual
funds.

Thanks to ETF's/Futures most mutual funds (e.g those that have a
fully invested mission) don't even carry cash balances w/o market
exposure.

Quote:If
I can show my clients that my funds are beating the indexes when they
are down, they are more likely to not jump-ship.  Also, as He puts
it:

“Two rules:1. Preserve the principal2. When in doubt see Rule #1”

Good luck with your SPDR over the next 12 months.

And mutual funds are related to principal preservation how?

If you want safety of principal hold cash. If you want more return, buy something else.

drewski803's picture
Offline
Joined: 2007-05-08

Why don't you just buy the individual securities if you're so fee-conscious?  Insitutional pricing?  Hmm, probably don't get that on the actual ETF share. 
burn!

SimplySimple's picture
Offline
Joined: 2007-05-25

Few things:
-Point and Figure Charting by Dorsey is awesome but you have to spend a lot of time studying I never finished but a great system that uses economics which never loses.
-Beating an indice is not always most important, lowering volatiliy should be king.  A simple excercise is to say a stock, index, fund, etc. gains 10% the 1st year 10% the second 10% the third then drops 10% the fourth.  What return has to be made the fifth year to avg 10% a year over the 5 year period.  A mutual fund tries to avoid the 4th year and that is a huge value.
-Studies show (for me it is fact in my mind) that allocation is 92% (something like that) of the success story rather than selection.  This means the appropriate allocation for a risk profile will usually make you look like a genius no matter what you pick.
-Basically your fine just study on allocation then you can do ok with not being the best picker.

new_indy's picture
Offline
Joined: 2007-03-28

I haven't gone through all 7 pages of replies, but I find ETF's the way to go.  You can do broad diversification with Widsomtree, first trust, powershares, etc.... and specific industry allocations as well.  Best of all, if you find you made a mistake and an industry is not doing as well as you projected, your clients can get out relatively easily.

Ashland's picture
Offline
Joined: 2007-03-06

How well did your indices perform in the late 60's and through the 70's? Yes, indices and ETF's are terrific investments - these last several years. But not always, and there are certain asset classes that it makes sense to have active mgmt and always will: Int'l, Emerging Mkts, Real Estate, Small Cap,etc.

Deciding that one way is right is the equivalent of buying all Putnam Funds in 1998 because they were the fund company(or just the right style of mgmt) of the decade and could do no wrong. Even w/o the style drift you got your head chopped off.

new_indy's picture
Offline
Joined: 2007-03-28

Actually as far as the real estate goes, unless you are looking at non-listed reits, active management is not a significant advantage to just purchasing a listed quality diversified Reit.  Either way you are buying management (same can be said for non-listed reits but let's keep them separate) and the whole group of quality reits moves in cunjunction with most of the REIT mfd's I've compared.  As for the other classes you mentioned, you better be pretty confident that the mfd manager of the groups in question isn't just riding a wave. 
The etf's in those classes have performed as well as managed mfd accounts, or better, in every comparison I have ever done.  Now note that I have not done every study possible, so there is always exceptions to the  rule so to speak. 
Finally, as for the 60's and 70's, if you are comparing the S&P to a mutual fund, be sure you are adding back in the dividends.   Some hypo tools that are out there do not acurately account for the dividends paid by the S&P, as indexes in and of themselves, do not pay a dividend since they are simply a scorecard.  A much more accurate comparison for that time frame would be to compare vfinx (which I personally don't use with my clients but have no problem with) with reinvestments at least as far back as '76.  If you need to go back farther than a 30 year cycle, I am not confident in suggesting where you might look.  Even proper diversification cannot prepare someone for every eventuality, and 30 years is a pretty good timeframe. 
Also if you look at most of the dividend leaders index's, (wisdomtree, First trust, vanguard, powershares and I am sure others) and compare their back-tested data with most of the g&i funds out there, in both the domestic and international categories, and in most of the various cap size you are looking for, you may possibly compelled to to revise your opinion....
... Or not since it is really just my opinion
 
 

new_indy's picture
Offline
Joined: 2007-03-28

Just noting that I said some hypo's don't account for the S&P dividend rate, but most do.  You just need to make sure what datasource you are using for your final value figures.

AllREIT's picture
Offline
Joined: 2006-12-16

new_indy wrote:Just noting that I said some hypo's don't account
for the S&P dividend rate, but most do.  You just need to make
sure what datasource you are using for your final value figures.

This is a classic trick for fluffing up the returns of active management.

Compare the total return of Fund XYZ vs the S&P Price Return.

Even then, alot of funds still come up bruised and bloody.

troll's picture
Offline
Joined: 2004-11-29

AllREIT wrote: new_indy wrote:
Just noting that I said some hypo's don't account for the S&P dividend rate, but most do.  You just need to make sure what datasource you are using for your final value figures.
This is a classic trick for fluffing up the returns of active management. Compare the total return of Fund XYZ vs the S&P Price Return.Even then, alot of funds still come up bruised and bloody.
A HELL of a lot of funds come up bloody.

deekay's picture
Offline
Joined: 2007-05-15

AllREIT wrote: new_indy wrote:
Just noting that I said some hypo's don't account for the S&P dividend rate, but most do.  You just need to make sure what datasource you are using for your final value figures.
This is a classic trick for fluffing up the returns of active management. Compare the total return of Fund XYZ vs the S&P Price Return.Even then, alot of funds still come up bruised and bloody.
When you say "Price Return" do you mean "Total Return"?  I've never heard of Price Return.

troll's picture
Offline
Joined: 2004-11-29

deekay wrote:AllREIT wrote: new_indy wrote:
Just noting that I said some hypo's don't account for the S&P dividend rate, but most do.  You just need to make sure what datasource you are using for your final value figures.
This is a classic trick for fluffing up the returns of active management. Compare the total return of Fund XYZ vs the S&P Price Return.Even then, alot of funds still come up bruised and bloody.
When you say "Price Return" do you mean "Total Return"?  I've never heard of Price Return.

Price return doesn't capture reinvested dividends.

deekay's picture
Offline
Joined: 2007-05-15

Bobby Hull wrote:deekay wrote:AllREIT wrote: new_indy wrote:
Just noting that I said some hypo's don't account for the S&P dividend rate, but most do.  You just need to make sure what datasource you are using for your final value figures.
This is a classic trick for fluffing up the returns of active management. Compare the total return of Fund XYZ vs the S&P Price Return.Even then, alot of funds still come up bruised and bloody.
When you say "Price Return" do you mean "Total Return"?  I've never heard of Price Return.

Price return doesn't capture reinvested dividends.

That's what I figured.  Thanks.
But I don't understand what he's trying to prove.  I found several funds in about two seconds that have beaten the S&P with dividends reinvested.  How can a fund company 'fluff up' returns?  All their hypos have to be NASD approved. 
Frankly, I think the whole 'active vs. passive' argument is done to let blowhards hear themselves talk.  Do right by your clients, give 'em a little of what they want, and our job is done.

troll's picture
Offline
Joined: 2004-11-29

deekay wrote:Bobby Hull wrote:deekay wrote:AllREIT wrote: new_indy wrote:
Just noting that I said some hypo's don't account for the S&P dividend rate, but most do.  You just need to make sure what datasource you are using for your final value figures.
This is a classic trick for fluffing up the returns of active management. Compare the total return of Fund XYZ vs the S&P Price Return.Even then, alot of funds still come up bruised and bloody.
When you say "Price Return" do you mean "Total Return"?  I've never heard of Price Return.

Price return doesn't capture reinvested dividends.

That's what I figured.  Thanks.
But I don't understand what he's trying to prove.  I found several funds in about two seconds that have beaten the S&P with dividends reinvested.  How can a fund company 'fluff up' returns?  All their hypos have to be NASD approved. 
Frankly, I think the whole 'active vs. passive' argument is done to let blowhards hear themselves talk.  Do right by your clients, give 'em a little of what they want, and our job is done.

When you compare some beat-off managed money strategy to the S&P 500 without dividends, it appears to do a much better job than it really does. These managed money guys are a bunch of crooks, except for my buddies that do managed money.

deekay's picture
Offline
Joined: 2007-05-15

Bobby Hull wrote:deekay wrote:Bobby Hull wrote:deekay wrote:AllREIT wrote: new_indy wrote:
Just noting that I said some hypo's don't account for the S&P dividend rate, but most do.  You just need to make sure what datasource you are using for your final value figures.
This is a classic trick for fluffing up the returns of active management. Compare the total return of Fund XYZ vs the S&P Price Return.Even then, alot of funds still come up bruised and bloody.
When you say "Price Return" do you mean "Total Return"?  I've never heard of Price Return.

Price return doesn't capture reinvested dividends.

That's what I figured.  Thanks.
But I don't understand what he's trying to prove.  I found several funds in about two seconds that have beaten the S&P with dividends reinvested.  How can a fund company 'fluff up' returns?  All their hypos have to be NASD approved. 
Frankly, I think the whole 'active vs. passive' argument is done to let blowhards hear themselves talk.  Do right by your clients, give 'em a little of what they want, and our job is done.

When you compare some beat-off managed money strategy to the S&P 500 without dividends, it appears to do a much better job than it really does. These managed money guys are a bunch of crooks, except for my buddies that do managed money.

The fact that any advisor compares any investment strategy (divs. reinvested) to the S&P500 (w/o divs. reinvested) is  FOS, regardless if it's an SMA, MF, VA, EIA, whatever. 
At the same time, any advisor that truly believes that indexing is the end-all, be-all of investment management is doing a disservice to his clients.  Period. 
There's a reason why institutions, pensions (i.e. smart money) hire active and passive managers.

new_indy's picture
Offline
Joined: 2007-03-28

hmmmmm.... I don't believe I said indexing is the end-all. be-all of investment management.  I believe I said that the array of index funds compared to comparable mutual fund categories is the method I choose to use.  I also find pure bonds to be a better option than bond funds (high quality stuff mostly), and individual high quality reits over long periods of time (as long as you don't buy one with an inflated price and reduced yield).  As far as the dividend reinvestment issue on the S&P, there are some hypo's even at large firms that only look at the price appreciation without the reinvested dividends.  Simply request the detailed by year screen and look for yourself.  Most provide the dividend in the equation and some don't.  I simply stated that you needed to verify the data to get the complete picture.
Now for that "disservice to your clients.  Period." shot you took:  
Pumping funds at 5.75% plus annual expense ratio's plus 12b-1 fees plus revenue sharing can be a disservice as well, without empirical evidence proving higher returns, unless there is a truly compelling reason.  Such as the need to DCA $100/mo or do a sytematic withdrawal. (certainly other reasons as well) 
Managed funds assuredly have their place, and are very convenient for specific applications.  Just like VA's are appropriate at times.  Every situation is different.  The question posted asked how we pick our funds and fund families.  ETF's no longer only track sp500, djia, and the nasdaq.  Backtesting the indexes that are available show little or no benefit to mfd's (other than as an specific application) on any of the hypo's I have run.  Stating that, you may well find some funds that outperform during any given year or short time frame, I certainly haven't tested them all.  I do frequently have to double check to make sure the etf I am looking at is a category and style match to whatever fund I am trying to compare it to.  If they are different, it isn't that hard to find one that matches up.  (simple example, a large cap value fund cannot be accurately matched up against the S&P, but there are plenty of available large cap value etf's in the world.  Same can be said for emerging markets, commodities, etc...) 
As for institutions and pensions, they hire money managers for several reasons including the hope of higher returns.  Some of the other reasons could be shared liability, available capital exceeds in-house experience level, the constant need for available short term cash positions, etc..., or just cuz it gives the perception that someone is doing something.  As I've only been a rep for one mid-sized pension, and it was just a short term bond account, I can't really answer the why of their thought process. 
I will tell you that a very good mfd manager who has beaten the S&P for most of his career once noted that when you are dealing with the large sums of money he works with, you only need to be right 10% of the time.  Meaning that institutions and pensions can take some risks, and are presented with some opportunities, that an average investors just aren't able or willing to take. 

echo's picture
Offline
Joined: 2007-06-01

I echo that: you are a moron!

troll's picture
Offline
Joined: 2004-11-29

deekay wrote:Bobby Hull wrote:deekay wrote:Bobby Hull wrote:deekay wrote:AllREIT wrote: new_indy wrote:
Just noting that I said some hypo's don't account for the S&P dividend rate, but most do.  You just need to make sure what datasource you are using for your final value figures.
This is a classic trick for fluffing up the returns of active management. Compare the total return of Fund XYZ vs the S&P Price Return.Even then, alot of funds still come up bruised and bloody.
When you say "Price Return" do you mean "Total Return"?  I've never heard of Price Return.

Price return doesn't capture reinvested dividends.

That's what I figured.  Thanks.
But I don't understand what he's trying to prove.  I found several funds in about two seconds that have beaten the S&P with dividends reinvested.  How can a fund company 'fluff up' returns?  All their hypos have to be NASD approved. 
Frankly, I think the whole 'active vs. passive' argument is done to let blowhards hear themselves talk.  Do right by your clients, give 'em a little of what they want, and our job is done.

When you compare some beat-off managed money strategy to the S&P 500 without dividends, it appears to do a much better job than it really does. These managed money guys are a bunch of crooks, except for my buddies that do managed money.

The fact that any advisor compares any investment strategy (divs. reinvested) to the S&P500 (w/o divs. reinvested) is  FOS, regardless if it's an SMA, MF, VA, EIA, whatever. 
At the same time, any advisor that truly believes that indexing is the end-all, be-all of investment management is doing a disservice to his clients.  Period. 
There's a reason why institutions, pensions (i.e. smart money) hire active and passive managers.

Actually, EIA's aren't credited with dividends, so it's fair to compare them to the stripped down S&P.

deekay's picture
Offline
Joined: 2007-05-15

Bobby Hull wrote:deekay wrote:Bobby Hull wrote:deekay wrote:Bobby Hull wrote:deekay wrote:AllREIT wrote: new_indy wrote:
Just noting that I said some hypo's don't account for the S&P dividend rate, but most do.  You just need to make sure what datasource you are using for your final value figures.
This is a classic trick for fluffing up the returns of active management. Compare the total return of Fund XYZ vs the S&P Price Return.Even then, alot of funds still come up bruised and bloody.
When you say "Price Return" do you mean "Total Return"?  I've never heard of Price Return.

Price return doesn't capture reinvested dividends.

That's what I figured.  Thanks.
But I don't understand what he's trying to prove.  I found several funds in about two seconds that have beaten the S&P with dividends reinvested.  How can a fund company 'fluff up' returns?  All their hypos have to be NASD approved. 
Frankly, I think the whole 'active vs. passive' argument is done to let blowhards hear themselves talk.  Do right by your clients, give 'em a little of what they want, and our job is done.

When you compare some beat-off managed money strategy to the S&P 500 without dividends, it appears to do a much better job than it really does. These managed money guys are a bunch of crooks, except for my buddies that do managed money.

The fact that any advisor compares any investment strategy (divs. reinvested) to the S&P500 (w/o divs. reinvested) is  FOS, regardless if it's an SMA, MF, VA, EIA, whatever. 
At the same time, any advisor that truly believes that indexing is the end-all, be-all of investment management is doing a disservice to his clients.  Period. 
There's a reason why institutions, pensions (i.e. smart money) hire active and passive managers.

Actually, EIA's aren't credited with dividends, so it's fair to compare them to the stripped down S&P.

Good point.  My mistake.

anonymous's picture
Offline
Joined: 2005-09-29

Actually, EIA's aren't credited with dividends, so it's fair to compare them to the stripped down S&P.
Actually, it's not fair to compare EIA's to the S&P without dividends.  If one invests in the S&P and doesn't reinvest the dividends, the dividends don't disappear.  The investor still gets the dividends.  They are just choosing to reinvest them elsewhere or using them to buy a new pair of shoes.
The S&P pays dividends so the dividends need to be included to have any sort of meaningful comparison.

troll's picture
Offline
Joined: 2004-11-29

anonymous wrote:
Actually, EIA's aren't credited with dividends, so it's fair to compare them to the stripped down S&P.
Actually, it's not fair to compare EIA's to the S&P without dividends.  If one invests in the S&P and doesn't reinvest the dividends, the dividends don't disappear.  The investor still gets the dividends.  They are just choosing to reinvest them elsewhere or using them to buy a new pair of shoes.
The S&P pays dividends so the dividends need to be included to have any sort of meaningful comparison.

YOu don't quite get it, but I'm too lazy to explain it. Since I see EIA's as CD/Bond/Fixed Annuity substitutes, I like to compare them to those rates and not the S&P. When you present them like this, you get much bigger tickets than if you present them as an alternative to equities.

anonymous's picture
Offline
Joined: 2005-09-29

Bobby, I completely get it.  I'm just saying it doesn't make sense to compare ANYTHING to the S&P without dividends.  Comparing an EIA to the S&P with dividends also doesn't make sense.
Since I see EIA's as CD/Bond/Fixed Annuity substitutes...
I completely agree with you.   I see EIA's as nothing more than fixed annuities with a different crediting method.

Billyclub's picture
Offline
Joined: 2007-04-26

How do I pick my funds?  Hmmmm....lets see Ameircan funds are at the top of the list ...let's look at those.....Good enough!   Oh wait the VanKampen guy just gave me a pen....let's see those.....good enough too!  Where is that dart board?

troll's picture
Offline
Joined: 2004-11-29

anonymous wrote:
Bobby, I completely get it.  I'm just saying it doesn't make sense to compare ANYTHING to the S&P without dividends.  Comparing an EIA to the S&P with dividends also doesn't make sense.
Since I see EIA's as CD/Bond/Fixed Annuity substitutes...
I completely agree with you.   I see EIA's as nothing more than fixed annuities with a different crediting method.

using the s&p 500 without divs is a gimmick used my the sleazy managed money people to make their sh*tty strategies look good and smooth out the effect of their fees. i wouldn't use it for anything, either.

AllREIT's picture
Offline
Joined: 2006-12-16

anonymous wrote:Actually, EIA's aren't credited with dividends, so it's fair to compare them to the stripped down S&P.
Actually, it's not fair to compare EIA's to the S&P without
dividends.  If one invests in the S&P and doesn't reinvest the
dividends, the dividends don't disappear. 

EIA's are credited based on the S&P Price Index, not the S&P Total Return Index.

So on that basis alone, a direct investment in SPY would have 1.9% annual advantage over the EIA. That is of course before the EIA's crediting caps and limited participation.

As usual, annuities are a bad investment for everyone except the broker and insurance company. As we used to say in Greenwich, 2 out of 3 ain't bad.

deekay's picture
Offline
Joined: 2007-05-15

AllREIT wrote: anonymous wrote:
Actually, EIA's aren't credited with dividends, so it's fair to compare them to the stripped down S&P.
Actually, it's not fair to compare EIA's to the S&P without dividends.  If one invests in the S&P and doesn't reinvest the dividends, the dividends don't disappear. 
EIA's are credited based on the S&P Price Index, not the S&P Total Return Index. So on that basis alone, a direct investment in SPY would have 1.9% annual advantage over the EIA. That is of course before the EIA's crediting caps and limited participation. As usual, annuities are a bad investment for everyone except the broker and insurance company. As we used to say in Greenwich, 2 out of 3 ain't bad.
You fail to point out in your comments that both Anon and Bobby use EIAs as an alternative for FIXED investments.  Any comparison to an all-stock index doesn't make sense.
As far as your comments about annuities being bad for all except the insurance company and the broker - why is a guaranteed lifetime income a bad thing?  Why is guaranteeing zero loss of principal a bad thing? 
For all the good things you post, Allreit, you seem to have a nasty habit of painting others with a broad brush.  Come to think of it, you sound like another so-called "expert" - a Ms. Suzy Ormon.
FTR - I've sold exactly three annuities in my life - when it was needed and was appropriate.  Please don't think I'm "all annuity all the time".

troll's picture
Offline
Joined: 2004-11-29

NotREIT is just a polack.

crashcourse's picture
Offline
Joined: 2007-06-01

Shut your gaping mouth hole, little dick.

anonymous's picture
Offline
Joined: 2005-09-29

deekay,
Good post.  For fair disclosure, I do believe that EIAs should be compared to fixed investments because that is what they are.  I think that they are often sold in a shady manner, but this doesn't make them bad products, but it does mean that there are some bad EIA salesmen (like any other product).  I do not use EIAs in my practice.  I do a small amount of fixed annuity business and about 10% (depending on the year) of my equity business is VA's.

troll's picture
Offline
Joined: 2004-11-29

crashcourse wrote:Shut your gaping mouth hole, little dick.
You're use of the word "gaping" reminds me of a story about your mom.....

crashcourse's picture
Offline
Joined: 2007-06-01

She said, " Bobby, VLP,  short man, very little penis, very big mouth." Bobby VLP. Thanks for clarifying how I know.
Shut your gaping mouth hole, little dick.

troll's picture
Offline
Joined: 2004-11-29

crashcourse wrote:
She said, " Bobby, VLP,  short man, very little penis, very big mouth." Bobby VLP. Thanks for clarifying how I know.
Shut your gaping mouth hole, little dick.

Did she mention that I was just one in a long line of black men?

crashcourse's picture
Offline
Joined: 2007-06-01

Mom's color blind. She said, " His penis is very small, he's short, and apparently he is happiest (smiles) when he is typing his computer."

FL Broker's picture
Offline
Joined: 2007-06-02

The way I pick funds ... is to use UITs!  Why?  Many funds have fairly high cash positions while UITs are virtually "all in."  Most investors presume a stock fund is invested in, well, stocks ... and not such a high percentage of cash equivalents.  The added equity exposure makes a big difference. 
Also, since many UITs are assembled through rigorous rules-based quantitative screening and selection methods, the vulnerability of human emotion in the buying and selling process is absent. 
Think of UITs this way:  Screen to identify the very best seeds to plant.  Plant them and let them grow for 15 months (or whatever the term), then harvest the crop and repeat the process. 
I present two alternatives -- classic asset allocation and strategy investing.  One can meticulously assemble a great mix of asset classes from around the world using individual securities or funds from one or more families ... or one can employ back-tested UIT strategies that have consistently and substantially beaten the averages over all the benchmark periods irrespective of asset class weightings. 
Do yourself a favor and explore the First Trust and Van Kampen web sites and look at the methodology and performance of their Target and Alpha strategies, respectively.  Amazing stuff!

AllREIT's picture
Offline
Joined: 2006-12-16

FL Broker wrote:The way I pick funds ... is to use UITs! 
Why?  Many funds have fairly high cash positions while UITs are
virtually "all in."  Most investors presume a stock fund is
invested in, well, stocks ... and not such a high percentage of cash
equivalents.  The added equity exposure makes a big
difference.  Quote:
Why not use ETF's? They are cheaper than UITs

Quote:Also, since many UITs are assembled through rigorous
rules-based quantitative screening and selection methods, the
vulnerability of human emotion in the buying and selling process is
absent. Quote:

How about the extremely human tendancy to data mine (back test) for interesting patterns in though random data?

Quote:Think of UITs this way:  Screen to identify the very
best seeds to plant.  Plant them and let them grow for 15 months
(or whatever the term), then harvest the crop and repeat the
process.Quote:
While collecting extra rent at each harvest, for a total lifetime cost far in excess of A-shares.

Quote:Do yourself a favor and explore the First Trust and Van
Kampen web sites and look at the methodology and performance of their
Target and Alpha strategies, respectively.  Amazing stuff!

If UIT strategies are so good, why arent UIT's more common and popular?

troll's picture
Offline
Joined: 2004-11-29

AllREIT wrote:FL Broker wrote:The way I pick funds ... is to use UITs!  Why?  Many funds have fairly high cash positions while UITs are virtually "all in."  Most investors presume a stock fund is invested in, well, stocks ... and not such a high percentage of cash equivalents.  The added equity exposure makes a big difference.  Quote:
Why not use ETF's? They are cheaper than UITs
Quote:Also, since many UITs are assembled through rigorous rules-based quantitative screening and selection methods, the vulnerability of human emotion in the buying and selling process is absent. Quote:
How about the extremely human tendancy to data mine (back test) for interesting patterns in though random data?
Quote:Think of UITs this way:  Screen to identify the very best seeds to plant.  Plant them and let them grow for 15 months (or whatever the term), then harvest the crop and repeat the process.Quote:
While collecting extra rent at each harvest, for a total lifetime cost far in excess of A-shares.
Quote:Do yourself a favor and explore the First Trust and Van Kampen web sites and look at the methodology and performance of their Target and Alpha strategies, respectively.  Amazing stuff!
If UIT strategies are so good, why arent UIT's more common and popular?
They are. How do you think I've made so much money in my VA's? Mutual funds?

anonymous's picture
Offline
Joined: 2005-09-29

If UIT strategies are so good, why arent UIT's more common and popular?
I use them often.  The answer to your question is that they aren't very tax efficient and they aren't appropriate for monthly investments.   I like using them for lump sums in rollovers.

FL Broker's picture
Offline
Joined: 2007-06-02

Why aren't UITs more common and popular?  For all intents and purposes, there are just three providers of UITs (First Trust, Claymore and Van Kampen) versus hundreds of mutual fund families.  Since UITs are broker-sold, you also don't see them advertised or talked about in the media.  (Why should glowing articles be written about them in the do-it-yourself magazines if the DIYers can't buy them and the sponsors won't advertise in the magazine anyway?) 
In my view, UITs are becoming increasing popular among brokers not only because of the well-thought-out strategies that have allowed investors to way outperform the major averages with substantially higher Sharpe ratios, but also because of their transparency (which allows investors to know precisely what they own). 
As for taxes, investors pay tax only on the gains they've actually realized when a trust terminmates.  Except for any short-term gains off of dividend reinvestments, all gains (by design) are long term (if the trust is held to maturity).  If you want to get into the market later in the year and choose to invest in a mutual fund, you could very well "inherit" capital gains that the fund realized long before you owned it.  Most people who are paying taxes anyway would prefer to pay them on larger gains rather than on smaller gains since, in the end, their net will be higher.  "Through the end of 2006, this American Fund has had an average annual return of 8% over the past five years, which includes the post 9-11 recession year of 2002, and 11% over the past 10 years.  This UIT strategy has averaged 16% over the same 5-year period and 21% over the same 10-year period.  They're both wonderful investments.  Which one would you like to take a closer look at, Mr. Jones?"  If it's true that people like to make easy decisions, guess how this scenario turns out every time?
As for not being "appropriate" for monthly investments, maybe the better word is "convenient."  Minimums are as low as $250 for qualified money (Claymore), although small tickets may not get you paid. 
FWIW, I use a combination of funds and UITs with managed ETF programs and/or annuities to build strategy and management diversification into my larger portfolios.

AllREIT's picture
Offline
Joined: 2006-12-16

FL Broker wrote: Since UITs are broker-sold, you also don't see them
advertised or talked about in the media.  (Why should glowing
articles be written about them in the do-it-yourself magazines if the
DIYers can't buy them and the sponsors won't advertise in the magazine
anyway?) 
Even if you had just one UIT sponsor, it wouldn't preclude them from advertising.

The funds sponsors also advertise extensively for themselves and mutual funds in various "Money" type magazines.
Quote:In my view, UITs are becoming increasing popular among
brokers not only because of the well-thought-out strategies that have
allowed investors to way outperform the major averages with
substantially higher Sharpe ratios, but also because of their
transparency (which allows investors to know precisely what they own).

You need to learn about the issues of backtesting and data
mining.  Investing based on trackrecords is like driving while
only looking at the rear view mirror. It can be very dangerious at
times.

As for the main reason UIT's aren't more common, it has to do with the TCO being higher than the cost of equivalent A-shares. Constantly rolling UIT's is going to cost the client alot more than a single hit with A-shares.

If the underlying strategies were so good, why arent they more popular? With a little effort anyone could replicate them.

There is a reason why UIT's are not a popular form of investment. With only a few sponsors and few users.
Quote:This UIT strategy has averaged 16% over the same 5-year
period and 21% over the same 10-year period.  They're both
wonderful investments.  Which one would you like to take a closer
look at, Mr. Jones?"  If it's true that people like to make easy
decisions, guess how this scenario turns out every time?

And then comes the issue of past performance/future results. As I remind clients, you can't eat past performance if you weren't part of it.

The question is what is going to happen after you buy the UIT, not what happened when you didn't own it.

Quote:FWIW, I use a combination of funds and UITs with managed ETF
programs and/or annuities to build strategy and management
diversification into my larger portfolios.

If UITs are so good, why not use only UITs?

anonymous's picture
Offline
Joined: 2005-09-29

Even if you had just one UIT sponsor, it wouldn't preclude them from advertising.
The funds sponsors also advertise extensively for themselves and mutual funds in various "Money" type magazines.
If brokers are selling the product, why pay for advertisements?  Not advertising seems to work for American Funds.
As for the main reason UIT's aren't more common, it has to do with the TCO being higher than the cost of equivalent A-shares. Constantly rolling UIT's is going to cost the client alot more than a single hit with A-shares.
The cost is higher, but that's not the reason.  If it was, then nobody would be in a fee-based account since fees are more expensive than an "A" share account.
If UITs are so good, why not use only UITs?
I hope that this isn't a serious question.  Like all investments, sometimes they are appropriate.  Sometimes, they aren't.

troll's picture
Offline
Joined: 2004-11-29

AllREIT wrote:FL Broker wrote: Since UITs are broker-sold, you also don't see them advertised or talked about in the media.  (Why should glowing articles be written about them in the do-it-yourself magazines if the DIYers can't buy them and the sponsors won't advertise in the magazine anyway?) 
Even if you had just one UIT sponsor, it wouldn't preclude them from advertising.
The funds sponsors also advertise extensively for themselves and mutual funds in various "Money" type magazines.
Quote:In my view, UITs are becoming increasing popular among brokers not only because of the well-thought-out strategies that have allowed investors to way outperform the major averages with substantially higher Sharpe ratios, but also because of their transparency (which allows investors to know precisely what they own).
You need to learn about the issues of backtesting and data mining.  Investing based on trackrecords is like driving while only looking at the rear view mirror. It can be very dangerious at times.
As for the main reason UIT's aren't more common, it has to do with the TCO being higher than the cost of equivalent A-shares. Constantly rolling UIT's is going to cost the client alot more than a single hit with A-shares.
If the underlying strategies were so good, why arent they more popular? With a little effort anyone could replicate them.
There is a reason why UIT's are not a popular form of investment. With only a few sponsors and few users.
Quote:This UIT strategy has averaged 16% over the same 5-year period and 21% over the same 10-year period.  They're both wonderful investments.  Which one would you like to take a closer look at, Mr. Jones?"  If it's true that people like to make easy decisions, guess how this scenario turns out every time?
And then comes the issue of past performance/future results. As I remind clients, you can't eat past performance if you weren't part of it.
The question is what is going to happen after you buy the UIT, not what happened when you didn't own it.
Quote:FWIW, I use a combination of funds and UITs with managed ETF programs and/or annuities to build strategy and management diversification into my larger portfolios.
If UITs are so good, why not use only UITs?

Hey you f**king retard, use your god damned brain for a minute. Would a client rather see Miami or Baghdad in his rear view mirror? You're such a f**king polack.

Please or Register to post comments.

Industry Newsletters
Careers Category Sponsor Links

Sponsored Introduction Continue on to (or wait seconds) ×