slouiscar Wrote: ------------------------------------------------------- > FrankArabia Wrote: > -------------------------------------------------- > ----- > > people use managers because the managers sell > > their product… > > Oversimplified. > > Do people own garbage as a result of a > salesperson, sure. But that does not mean that > others don’t seek out managers for other reasons. > Maybe they want to gain access to professional > management, an investment philosophy or maybe even > a perceived repeatable process that has resulted > in a history of peer-beating returns or positive > alpha or beating the S&P or whatever. They might > be right or wrong but there was a process involved > as opposed to a sale. > > people drive Fords because Ford sells cars… what is your explanation of why people buy MF? people buy funds because you have a bunch of people pushing the product. in addition to thsi, you have a bunch of people that think active management is better then passive. i would never buy a mutual fund because I know better or just woudln’t watn to take the risk with a managger. if the average joe knew that the average portfolio manager can’t even beat an index, they won’t buy it. but you have a bunch of salespeople that tell them, “you have to invest, and the mutual fund is the best way to go”.
JDV- im not saying that the statistic is wrong. i’m saying that you have to be careful to understand what data is used when a statistic is calculated before you can say what it means… “87% of all funds return less than S&P” Maybe it is a true statement, but it doesn’t mean much to me because of the questions that I mentioned earlier. “87% of all funds that have the S&P as their benchmark underperform it” has a much more significant meaning than what the OP stated. Two different statements with two very different meanings.
Maybe you should think a little more about mutual funds. There are all kinds of advantages about ETF’s when they exist but mutual funds have their place in the world. 1) Mutual funds allow access to a broader range of investments (still) 2) Mutual funds reinvest dividends and other cash flows so you don’t have to worry about it or pay commissions to reinvest 3) Mutual funds give you liquidity in securities that may not be liquid themselves (no bid on those junk bonds, huh? redeem my shares anyway). 4) Mutual funds are very easy to manage online and at tax time 5) Not everyone in the world wants to deal with brokerage accounts or brokers. 6) Mutual funds are required (I think) for college savings plans like 529’s and education IRA’s.
mutual funds certainly have a place in the world. for clients that don’t want to care or do anything about their investmetns, MF is the way to go.
FrankArabia Wrote: ------------------------------------------------------- > what is your explanation of why people buy MF? > people buy funds because you have a bunch of > people pushing the product. Well, I think that saying that the ONLY reason people buy mutual funds is because people are pushing the product is an unfair generalization. I mentioned my explanation. One reason I offered was that some people buy funds for access to professional managers with a history of success, using repeatable processes. Chris Davis was an example given. > i would never buy a mutual fund because I know > better or just woudln’t watn to take the risk with > a managger. if the average joe knew that the > average portfolio manager can’t even beat an > index, they won’t buy it. but you have a bunch of > salespeople that tell them, “you have to invest, > and the mutual fund is the best way to go”. The average joe should know that 90% don’t beat the index. This is not some new breakthrough. If the only reason to buy a mutual fund was because a salesperson pushed it then there would be virtually no market for no-load funds. Now if you feel that passive is the way to go that is fair. I would just add that in a bear market the % of managers beating the benchmarks rises significantly. If I index with X% of my large cap holdings and with 1-X% I use a few managers to umm manage… In 2000, 2001, 2002, I make out OK. In fact the full market cycle #'s look just fine.
i thought MF was the only/best way to gain exposure to FI products for retail investors. does TD sell bonds directly to the retail investor at a reasonable ask/bid spread?
nolabird032 Wrote: ------------------------------------------------------- > i thought MF was the only/best way to gain > exposure to FI products for retail investors. does > TD sell bonds directly to the retail investor at a > reasonable ask/bid spread? The 87% number applies only to large cap US equity managers. I believe the evidence for active management is better for small cap, international (EAFE is a very easy index to beat), and other asset classes.
nola, i can’t say whether the bonds are fair or not since these are dealer markets and i don’t have any real info to base that on (aside from the last day closing). all i do is call in and get the quote and its different depending on the size. from many complaints, the bid and ask is pretty bad. however, i don’t find too many clients buying corporate bonds. i mean, the GIC is 4.7 percent and a AAA bond is usually around the same yield. the only ones i see that are 6.5 or more are BB bonds. i was thinking on getting some bonds actually.
HoldSideAnalyst Wrote: ------------------------------------------------------- > nolabird032 Wrote: > -------------------------------------------------- > ----- > > i thought MF was the only/best way to gain > > exposure to FI products for retail investors. > does > > TD sell bonds directly to the retail investor at > a > > reasonable ask/bid spread? > > The 87% number applies only to large cap US equity > managers. I believe the evidence for active > management is better for small cap, international > (EAFE is a very easy index to beat), and other > asset classes. that was in response to frank’s post. apparently he’s changed his mind that MF are only for investors that dont care… and he is going to purchase a FI MF 
i’m not purchasing any fund. i haven’t changed my mind either. i still believe that mutual funds are driven primarily by sales. however, it is good for people who don’t care because they don’t have to sit around nad worry and bother wtih stuff like proxies or serious market gyrations. in essence, the MER is not the cost to select investments, but for people to take care of you. i’ll diversity my money in index funds for sure. no doubt about that.
you’d rather pay higher fees to the dealers via bid/ask than buy a FI MF because you think its the lazy way to invest? thats genius.
Beating the market when you have $50B in AUM is very difficult. Beating the market over the long run is incredibly easy if your capital base is small (
negativefcf Wrote: ------------------------------------------------------- > Beating the market when you have $50B in AUM is > very difficult. > > Beating the market over the long run is incredibly > easy if your capital base is small ( would apply to the majority of people on this > forum. This is assuming that you have reasonable > knowledge of the equity market and no hesitation > in owning small cap/micro cap companies. We’re not talking about beating the S&P 500 using small cap stocks, we’re talking about beating the S+P 500 using large cap stocks.
nola, i’m not talking about FI mutual funds. i’m talking about equity. and yes, i would rather buy XIU then a large cap MF. smart money is going to go to the index since the odds are against the PM to outperform the index over a 10 year period. i’m going to check up on the FI MF returns and see how they compare to GICs. the only FI MF i would consider buying right now is emerging market FI MF since its harder to get access to that stuff.