Author Topic: HELP Needed - AZNCX  (Read 2738 times)

boarder42

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HELP Needed - AZNCX
« on: April 12, 2016, 07:07:44 AM »
My dad is currently invested in this and cant get over the fact that it "pays out such a large dividend"  - he even got my little brother invested in it.  its got terrible ratings on morningstar and has a 2.07% expense ratio - his arguement is that he gets 8c a month in dividends which equates to about 9.6% a year at 10 dollars per share for the fund.  anyone have any math analysis i can put in front of them/him.  they understand math but i havent been able to convince him this isnt worth it.

forummm

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Re: HELP Needed - AZNCX
« Reply #1 on: April 12, 2016, 07:45:11 AM »
I just compared the fund performance for the last 5 years to VTSAX. If he put $10k in the fund 5 years ago he'd have around $12,500. If he'd invested in VTSAX instead he'd have around $18,000. Seems obvious.

boarder42

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Re: HELP Needed - AZNCX
« Reply #2 on: April 12, 2016, 07:55:04 AM »
I just compared the fund performance for the last 5 years to VTSAX. If he put $10k in the fund 5 years ago he'd have around $12,500. If he'd invested in VTSAX instead he'd have around $18,000. Seems obvious.

does that include the dividend payouts b/c i dont see that it does

2buttons

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Re: HELP Needed - AZNCX
« Reply #3 on: April 12, 2016, 08:12:37 AM »
Every comparison I have seen assumes a reinvestment of dividends. I put it into schwab and got a similar result.  Although AZNCX has only been around since 2007. 

I would print off the comparison and show him that he is leaving cash on the table.  That said, convincing  someone against their will is sometimes futile.

boarder42

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Re: HELP Needed - AZNCX
« Reply #4 on: April 12, 2016, 08:20:22 AM »
yeah i know he's pretty open to my knowledge of all of this.  just cant seem to get over the "guaranteed" 8c per share he is getting monthly.  well if the pool of funds doesnt perform and you're getting 8c then the fund goes down by 8c assuming they stay flat/keep up with that 2% exp. ratio.

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Re: HELP Needed - AZNCX
« Reply #5 on: April 12, 2016, 08:32:11 AM »
Fees seem a lot higher all around. 

Net Expense Ratio
AZNCX - 2.04%
VTSAX - .05%
Delta - 1.99% higher.

12b-1
AZNCX - 1%
VTSAX - 0%
Delta - 1% higher.

I am sure there are smarter people on here who could explain this quicker than I could, and would also appreciate a better analysis. 

boarder42

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Re: HELP Needed - AZNCX
« Reply #6 on: April 12, 2016, 08:54:15 AM »
Fees seem a lot higher all around. 

Net Expense Ratio
AZNCX - 2.04%
VTSAX - .05%
Delta - 1.99% higher.

12b-1
AZNCX - 1%
VTSAX - 0%
Delta - 1% higher.

I am sure there are smarter people on here who could explain this quicker than I could, and would also appreciate a better analysis.

correct all straightforward to me as well.  but i'd like some more indepth analysis. Morningstar also ranks it at 2 stars.  Enough for me to stay far away but i have to convince my dad.  and getting around that 9.6% in dividends he's making annually is going to be a sticking point with out just a little more data than these glaringly obvious red flags. in reality it wont affect him he has much more than he needs its my brother i'm concerned about. 
« Last Edit: April 12, 2016, 09:11:53 AM by boarder42 »

forummm

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Re: HELP Needed - AZNCX
« Reply #7 on: April 12, 2016, 09:35:25 AM »
I just compared the fund performance for the last 5 years to VTSAX. If he put $10k in the fund 5 years ago he'd have around $12,500. If he'd invested in VTSAX instead he'd have around $18,000. Seems obvious.

does that include the dividend payouts b/c i dont see that it does

Yes it does. Morningstar is one of the few places that includes total return. If it had excluded dividends the return on the fund would be negative since its share price has fallen almost 30% during that time period.

boarder42

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Re: HELP Needed - AZNCX
« Reply #8 on: April 12, 2016, 10:13:16 AM »
ok just wanted to make sure they did, thats who i was using as well.  My dad also did an annuity with them.  its not going to affect his retirement but he could have alot more money if he had avoided these guys.  Now just need to figure out how to explain this to them so they change their investments.

GregO

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Re: HELP Needed - AZNCX
« Reply #9 on: April 12, 2016, 11:28:05 AM »
As forummm said, the argument should simply be the Total Returns.  A good comparison to AZNCX is VWIAX, which is Vanguard's Wellesley fund.  The funds are very similar.   Both funds are also weighted similarly in large funds and focus on providing dividends.  Both funds hold about 33% stocks.  VWIAX holds 60% bonds, where AZNCX holds 30% bonds and 30% other (I didn't investigate what "other" was, maybe real estate?).   Of course, VWIAX has a 0.16% expense ratio.  It also has a $10,000 minimum (If that's a problem, you can still use VWINX which is the same fund with a 0.23% ER and $3,000 minimum).

To compare them, you can go to the interactive chart for AZNCX on Morningstar and compare it to VWIAX: you can see that $10,000 would be worth $18,200 if invested in VWIAX and $15,600 in AZNCX (including dividends) after 9 years (that's how long AZNCX has existed).  So they are sacrificing $3,000 over the last 9 years for the convenience of getting their money distributed back to them monthly.  The chart on Morningstar includes all the dividends that have been paid out, so it's not added to the total return or anything.  They are literally giving up profit in order to get bigger monthly checks.

If you look at the dividend and capital gain distributions, AZNCX does provide about twice the dividends as VWIAX.  VWIAX pays quarterly and roughly 50% of the distributions are Long Term capital gains distributed at the end of the year.  So if this is invested in a taxable account, they'd likely be paying less taxes on VWIAX distributions as well.  But the distributions are less often, with a large portion of the distribuion coming at the end of the year.  If they wanted bigger distributions, they could sell a small portion of their holdings periodically to get the additional cash they want and be much better off in the long run.

Of course, you can also point out that VWIAX charges about 10% of what AZNCX does for a very similar service.  And I didn't research it really hard, there may be other funds out there that offer distributions that are more similar to AZNCX.

boarder42

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Re: HELP Needed - AZNCX
« Reply #10 on: April 12, 2016, 06:10:27 PM »
Created a new post he is open to better funds if they pay that out 9+% in dividends.