Author Topic: Kill it dead: "5 Funds That Crush The S&P"  (Read 1972 times)

CogentCap

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Kill it dead: "5 Funds That Crush The S&P"
« on: April 24, 2018, 09:34:15 AM »
Okay, Mustachians--in particular, you savvy, mathy Investor Mustachians with graphs and charts and the like--here's an article that makes what could possibly be a good point.  Or else it's total garbage, I can't tell.  Please read, then set guns to blaster mode as required:

https://www.forbes.com/sites/michaelfoster/2017/01/11/5-funds-that-crush-the-sp-500-and-pay-9-3-dividends/


MrMoogle

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Re: Kill it dead: "5 Funds That Crush The S&P"
« Reply #1 on: April 24, 2018, 09:40:28 AM »
It's garbage, since it only goes back 10 years.  Most of it is dictated by how it handled the crash in 08.

RWD

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Re: Kill it dead: "5 Funds That Crush The S&P"
« Reply #2 on: April 24, 2018, 09:43:57 AM »
You can tell it's garbage just from the title.

Recommended reading:
http://jlcollinsnh.com/2012/04/25/stocks-part-iii-most-people-lose-money-in-the-market/

Arbitrage

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Re: Kill it dead: "5 Funds That Crush The S&P"
« Reply #3 on: April 24, 2018, 10:12:55 AM »
HQL/HQH: Simple morningstar plot vs. VGHIX (Vanguard Health Care Index Admiral) shows both of those underperforming their sector over the past 10Y, 5Y, 3Y, 1Y, YTD.  Had a good run up 2011-mid 2015, then underperformed.  This is before taxes - after taxes, those would've underperformed significantly.  Versus the total market, the author just looked at past results and found a sector that did well.  Good for him.  Doesn't say those will outperform in the future.  In fact, from the article publish date of 1/11/2017 to today, these funds have underperformed both their index and the overall market on a pretax basis, and would be even worse after taxes. 

BTO: Has outperformed its index (VFAIX) over the past 10, 5, 3 years.  Underperform for last 1 year.  Kind of how active management goes.  Of note: article is dated 1/11/2017.  From 1/11/2017-today, BTO has underperformed VFAIX, 15% vs 20% growth before taxes.  Again, after taxes it'd be worse.  Also not impressive.

PHK, PGP: Junk Bonds.  You'll get differing opinions on whether or not these add value to a portfolio, even among experts.  It's disingenuous to compare them to high-quality bonds in a bull market without acknowledging the downsides.  PGP (bonds only) was absolutely slaughtered during the financial crisis, with a loss of 72%, worse than equities.  PHK also did worse than equities, but not as bad since it had a mix of equities and bonds (equities pulled the performance up...that's how bad the bonds were).  These are not any way, shape, or form a substitute for bond funds in your portfolio.

Of course I'm using total return, not just price return.  Easy to do in morningstar even for ETFs if you plot a mutual fund first.

Killed?
« Last Edit: April 24, 2018, 10:18:12 AM by Arbitrage »

DS

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Re: Kill it dead: "5 Funds That Crush The S&P"
« Reply #4 on: April 24, 2018, 12:10:29 PM »
Crushed, clobbered, killed!!!!1!

CogentCap

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Re: Kill it dead: "5 Funds That Crush The S&P"
« Reply #5 on: April 26, 2018, 08:45:58 AM »

CogentCap

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Re: Kill it dead: "5 Funds That Crush The S&P"
« Reply #6 on: April 26, 2018, 08:49:57 AM »
HQL/HQH: Simple morningstar plot vs. VGHIX (Vanguard Health Care Index Admiral) shows both of those underperforming their sector over the past 10Y, 5Y, 3Y, 1Y, YTD.  Had a good run up 2011-mid 2015, then underperformed.  This is before taxes - after taxes, those would've underperformed significantly.  Versus the total market, the author just looked at past results and found a sector that did well.  Good for him.  Doesn't say those will outperform in the future.  In fact, from the article publish date of 1/11/2017 to today, these funds have underperformed both their index and the overall market on a pretax basis, and would be even worse after taxes. 

BTO: Has outperformed its index (VFAIX) over the past 10, 5, 3 years.  Underperform for last 1 year.  Kind of how active management goes.  Of note: article is dated 1/11/2017.  From 1/11/2017-today, BTO has underperformed VFAIX, 15% vs 20% growth before taxes.  Again, after taxes it'd be worse.  Also not impressive.

PHK, PGP: Junk Bonds.  You'll get differing opinions on whether or not these add value to a portfolio, even among experts.  It's disingenuous to compare them to high-quality bonds in a bull market without acknowledging the downsides.  PGP (bonds only) was absolutely slaughtered during the financial crisis, with a loss of 72%, worse than equities.  PHK also did worse than equities, but not as bad since it had a mix of equities and bonds (equities pulled the performance up...that's how bad the bonds were).  These are not any way, shape, or form a substitute for bond funds in your portfolio.

Of course I'm using total return, not just price return.  Easy to do in morningstar even for ETFs if you plot a mutual fund first.

Killed?

Yes, totally annihilated.  You owned it. 

I figured it had some kind of slant to it, like the author was cherrypicking his funds or results, but being pretty new to the investing side of life and severely unmathy myself, I couldn't easily tell.  Thanks for this awesome response.