Portfolio 101

[lookout123]

again - i have 4 fund families on my desk. my fav. has had 80% of the team in place since before the 1987 correction. 50% since before the 1973/4 correction. tw - although you carefully research for support of your views, you have taken anecdotal information and built an entire system of belief around it. you probably know as well as anyone that 5 years is just a blip in the market. you stack your top 5 picks against my balanced fund portfolio and i will come out ahead in the long haul.

[Undertoad]

I don't know, but I don't need or expect it to outperform every single year... this is long term money

[lookout123]

has anyone taken the time to figure out why it is better to choose a solid fund with what seem like mediocre returns, compared to grabbing the best performers and running with them?

it's simple - the arithmetic of loss is devastating.

grab your calculator. this is an extreme example but say you are really aggressive (that is the only way to show HUGE gains on individual equities) - starting with $100K

1st year - 60% gain
2nd year - 40% loss
3rd - 60% gain
4th -40% loss

you would have $92K left.

a fund that only got 5% 3 out of 4 years and broke even on the 4th. 5% is half of what most decent funds are doing over a 10 year period.

1st - 5% gain
2nd - 5% gain
3rd -5% gain
4th - 0% gain

(conservative funds are designed to NOT lose money on the bad years. everyone gains money on good years - it is what happens during the down times that matters.)

you would end with $115K going at it extremely conservatively. in reality the fund i have been talking about has averaged an 11.35% return over the last 10 years AFTER sales charges.
4th - 0% gain

[depmats]

Originally posted by tw
tw has contempt for those who post with emotion rather than using logic. Look at Lookout123's recent post. He does post facts. Nothing mean spirited in anything he posted. He posted his perspective using factual information.

UT also posted facts. For example he noted one of the Vanguard funds cited is a excellent performer. Some are. Others are not. The overall market average for mutual funds is to underperform. Your perspective may vary. That too is a fact.

In the meantime, a five year chart of that cited Vanguard fund. Did they have management change a few years back? Cited elsewhere is that Vanguard fund managers typically stay with the fund for about 3 years.

Um, brilliant response to getting your rear handed to you by the real facts. And by the way - keep your contempt, I've got enough.