Mutual Fund Familes

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Apr 6, 2009 7:43 pm

What fund familes do you use and why?  I work with Jones and am using Lord Abbot and America.  What else is out there that can benefit my clients?  Thanks!

Apr 6, 2009 9:34 pm

Fund families?  Before last year I would have said Fidelity, but their funds got murdered.  The year before that I woulda said Van Kampen but their funds got murdered.  Its on a fund by fund basis with me now.  A few good funds:

John Hanc*** Balanced
Thornburg International Value
MFS Municipal
Eaton Vance Greater China
AIM Mid Cap Core
 
At some point this will come in handy when you move away from charging clients 5.75% for the right to be in the same fund family for 10 years.
Apr 6, 2009 9:34 pm

You have everything you need in those two. Seriously though you might want to look at Davis, Allianz Pimco, First Eagle, Ivy just to get started.....

Apr 6, 2009 9:40 pm

Thanks!

Apr 6, 2009 10:27 pm

Putnam and Federated

Apr 6, 2009 10:41 pm

Ron, I've heard Putnam is not so great.  What makes you choose them?

Apr 6, 2009 10:49 pm
voltmoie:

What fund familes do you use and why?  I work with Jones and am using Lord Abbot and America.  What else is out there that can benefit my clients?  Thanks!

 
Mutual funds are too expensive, have sh*tty performance, and have outdated pricing. It's pretty ridiculous that we have days of 9% market swings and only end of day NAV pricing.
 
Active manager's rarely if ever beat the indices, you might get lucky and have an emerging markets, international, or small cap manager beat every once in awhile.  Then when their style goes out of favor they'll be back in the bottom quartile.  I'd use etf's inside a fee base platform.
Apr 6, 2009 11:13 pm
Baba Booey:
voltmoie:

What fund familes do you use and why?  I work with Jones and am using Lord Abbot and America.  What else is out there that can benefit my clients?  Thanks!

 
Mutual funds are too expensive, have sh*tty performance, and have outdated pricing. It's pretty ridiculous that we have days of 9% market swings and only end of day NAV pricing.
 
Active manager's rarely if ever beat the indices, you might get lucky and have an emerging markets, international, or small cap manager beat every once in awhile.  Then when their style goes out of favor they'll be back in the bottom quartile.  I'd use etf's inside a fee base platform.
 
Yep.  I usually spread around a few heavy hitting mutual funds and use a solid mix of ivv, ijh, ijr, efa, agg, mub, whatever other ones fit a risk tolerance (rwr, ewz). 
Apr 7, 2009 9:45 am

VOlt, American and Franklin are good if you need to hit breakpoints with one family, as they have a large lineup of good funds in many categories.  However, there are many other fund families that excel in specific areas, niches, or asset classes;

PIMCO/Allianz - fixed income, small cap value
IVY - Asset Strategy
First Eagle - Global and International Funds are excellent.  Good gold manager.
Blackrock - Global Fund is stellar, they also excel in other areas
Franklin is also a very good fixed income manager in several categories
Templeton - Global Bond fund
Franklin/Mutual Series (I like Mutual Discovery)
 
As a sidenote on American and Franklin, there can be a lot of overlap if you are not careful.  American has a lot of overlap among their value/G&I funds, so be careful about what you pair together with equity funds.  And even if there is not specific holdings overlap, there is style overlap, so many of the equity funds rise and fall with the same tide.  With Franklin, many of their Mutual Series funds have tremendous overlap, so generally only use ONE of those funds.
 
Or to be safe, just use Putnam.
Apr 8, 2009 2:44 am

I typically use Hartford, Lord Abbett and Franklin.  I do use Pioneer and MFS from time to time also.

Apr 8, 2009 5:51 am

Which fund family is going to be the best in the future?  We don't know.  If you have a client who is putting $500/month away into Hartford, Lord Abbot, Franklin, Pioneer, MFS, American, etc, if it is the same type of fund, the results will be fairly similar.  Even if they aren't, it won't be known in advance. 

 
Instead, guarantee that you'll improve their performance by 20%.  Use whatever fund that you would like, and then find an extra $100/month to put away.
 
With rare exception, the people with the most money are the ones who put the most money away.  It doesn't seem to matter whether the money is in load funds, no load funds, actively managed investments, passively managed investments, VAs, stocks, bonds, CDs, life insurance, real estate, etc. 
 
I'm not saying that the choice of funds don't matter.  It does.
I'm not saying that asset allocation doesn't matter.  It does.
What I am saying is that both of those pale in comparison to the amount of dollars being invested.
 
We don't have a crystal ball to pick the best funds.  We don't have a crystal ball to pick the best asset allocation.   Our crystal ball only works to tell us that if the client invests more, they will have more in the future.
Apr 8, 2009 9:08 am

Anon, I could not agree more.  As far as similar style funds, if you are picking good quality managers, in a bull market, the results will all be good, and you won't know in advance which will outperform anyway.  So ultimately, it's how much you put away that matters.

 
Case in point is myself:
I worked in corporate finance for about 13 years before I came into this business.  I had the forsight (and my first boss out of college strongly encouraged me) to max out my 401K every single year, regardless of how poor I was in the beginning.  So without making huge money (I made very good money), I had amassed a solid 6-figure 401K balance by age 28.  Yes, I paid attention to my investment choices, but it was an average-at-best 401K plan, so my investment choices were nothing remarkable.  I also wiped out all my debt (other than my mortgage).  So by age 28, I had a much higher net worth than what I see in many of my clients today that are in their late 30's and 40's, who make more than double what I was making back then.  Did I do anything remarkable? No.  Did I pick great funds? No.  I just maxed out my contributions come-hell-or-high-water.  Granted, most of that was accumulated during the 90's when the market was smoking, but even with the past 10 years factored in, I am still well over 6 figures.
 
So many of those high-paid clients I am referring to are scientists with Masters and PhD's.  Many make in the high 100's and low 200's.  Many have spouses that work and put their combine incomes well north of 200 and some into the 300's.  But they are dumb as sh1t when ti comes to saving.  They all have 300-500K mortgages, 2 huge car payments, RE tax bills of 8K per year, college loans, credit cards, and they are in their 30's and 40's.  These people cannot even put 10% away in their 401K's, let alone put money into savings.
 
To contrast, I have a client that is an engineer, lives in a small cottage-style house, makes about 70K per year.  His wife makes about 40K.  Mid 30's.  Cars are paid for, no debt (other than 150K mortgage).  He has over 350K in his 401K (actually, less than that since this past year), keeps maxing it out, and is also putting away about $500 into savings and are both maxing out Roths.  And he has a pension he is accruing.
 
Tell me, who will live the better retirement, the couple currently making 250K, or the couple currently making 115K?  Here's a clue....I didn't even mention their investment choices.
 
Apr 8, 2009 9:33 am
B24:

Anon, I could not agree more.  As far as similar style funds, if you are picking good quality managers, in a bull market, the results will all be good, and you won't know in advance which will outperform anyway.  So ultimately, it's how much you put away that matters.

 
Case in point is myself:
I worked in corporate finance for about 13 years before I came into this business.  I had the forsight (and my first boss out of college strongly encouraged me) to max out my 401K every single year, regardless of how poor I was in the beginning.  So without making huge money (I made very good money), I had amassed a solid 6-figure 401K balance by age 28.  Yes, I paid attention to my investment choices, but it was an average-at-best 401K plan, so my investment choices were nothing remarkable.  I also wiped out all my debt (other than my mortgage).  So by age 28, I had a much higher net worth than what I see in many of my clients today that are in their late 30's and 40's, who make more than double what I was making back then.  Did I do anything remarkable? No.  Did I pick great funds? No.  I just maxed out my contributions come-hell-or-high-water.  Granted, most of that was accumulated during the 90's when the market was smoking, but even with the past 10 years factored in, I am still well over 6 figures.
 
So many of those high-paid clients I am referring to are scientists with Masters and PhD's.  Many make in the high 100's and low 200's.  Many have spouses that work and put their combine incomes well north of 200 and some into the 300's.  But they are dumb as sh1t when ti comes to saving.  They all have 300-500K mortgages, 2 huge car payments, RE tax bills of 8K per year, college loans, credit cards, and they are in their 30's and 40's.  These people cannot even put 10% away in their 401K's, let alone put money into savings.
 
To contrast, I have a client that is an engineer, lives in a small cottage-style house, makes about 70K per year.  His wife makes about 40K.  Mid 30's.  Cars are paid for, no debt (other than 150K mortgage).  He has over 350K in his 401K (actually, less than that since this past year), keeps maxing it out, and is also putting away about $500 into savings and are both maxing out Roths.  And he has a pension he is accruing.
 
Tell me, who will live the better retirement, the couple currently making 250K, or the couple currently making 115K?  Here's a clue....I didn't even mention their investment choices.
 
 
Probably one of the truest and best posts I've reaad on here.
Apr 8, 2009 4:29 pm

B24 -

Apr 8, 2009 9:21 pm
voltmoie:

What fund familes do you use and why?  I work with Jones and am using Lord Abbot and America.  What else is out there that can benefit my clients?  Thanks!

 
Tell me you are kidding and can't type.. American? Why L.A. terrible stuff..
Apr 8, 2009 9:25 pm

Since I know your restrictions at jones... look at first eagle.. blackrock has some stuff too you could use..

Apr 9, 2009 6:48 am

Ice,



Your point is well taken, but a bit exaggerated. If Sam is paying a fee for his wrap account, his FA should be providing value by helping Sam stay on course with his plan during tough times.



Does Sam honestly think he will stay on course no matter what for 30 years? You and I know that most investors changer their plans once they start losing money, unless they have an Advisor to keep them on course.



And that my friend, is more important than wrap fees, bps, etc.

Apr 9, 2009 9:33 am

Ice - you must have been really tired when you posted that last one.  Yours are usually so much better.  I'm going to give you a C- for effort.  I'll give you a B+ for the theory. 


What fund from Putnam did Sam use?  Was his portfolio diversified?  Did he meet annually with his FA to rebalance?  Did they buy and forget or did they buy and manage? 
 
What investments did Bob use to get to 8.5% avg for 30 years?  Was his portfolio diversified?  Did he meet with his advisor to rebalance?   
 
Details, man, we need details. 
Apr 9, 2009 10:09 am
iceco1d:
anonymous:

Which fund family is going to be the best in the future?  We don't know.  If you have a client who is putting $500/month away into Hartford, Lord Abbot, Franklin, Pioneer, MFS, American, etc, if it is the same type of fund, the results will be fairly similar.  Even if they aren't, it won't be known in advance. 

 
Instead, guarantee that you'll improve their performance by 20%.  Use whatever fund that you would like, and then find an extra $100/month to put away.
 
With rare exception, the people with the most money are the ones who put the most money away.  It doesn't seem to matter whether the money is in load funds, no load funds, actively managed investments, passively managed investments, VAs, stocks, bonds, CDs, life insurance, real estate, etc. 
 
I'm not saying that the choice of funds don't matter.  It does.
I'm not saying that asset allocation doesn't matter.  It does.
What I am saying is that both of those pale in comparison to the amount of dollars being invested.
 
We don't have a crystal ball to pick the best funds.  We don't have a crystal ball to pick the best asset allocation.   Our crystal ball only works to tell us that if the client invests more, they will have more in the future.
 
Just cuz I'm bored...
 
Bob puts away $6,000 ($500 per month) per year for 30 years.  He gets an 8.5% average annual return.  After 30 years, he has $745,288.
 
Sam finds an extra 20% and manages to put away $7,200 ($600 per month) per year for 30  years.  Except, Sam gets fooled by the Putnam brochure and thinks it must be a great idea to pay a bunch of CFAs in $5,000 suits to "manage" his mutual funds and pay a few dozen extra bps a year in management fees.  He also doesn't know what the repercussions (costs) of 75% or 100%, or more, in fund turnover is.  He also thinks his wrap account at 1.75% is awesome because there are no commissions.  In any case, Sam finds a way to make enough subtly stupid decisions, and flushes 1.25% a year of annual return down the toilet through non-value added costs.  Sam, even though managed to scrape together an extra 20% a year to save for retirement, only has $711,489 after 30 years.

Sucks for Sam, huh? 
 
Sam still has 20% more than he would have had if he only invested $500/month.   Bob would have 20% more more if he would have invested 20% more. 
Apr 9, 2009 10:33 am

ICE, I see your point, but the premise was that we should always TRY to seek out the best advice or investments, but that over any given period, it's tough to know what is going to work best among two equally acceptable investment options.  Therefore, the best thing to do is pick quality investments but focus on stashing away as much as possible for as long as possible.

 
And in my experience, it's not a matter of putting $600 vs. $500 a month away.  It's the person putting away $250 (when they COULD do much more) vs. the person putting away $800 per month.  And the person putting away $800 has been doing it longer, and has been more consistent about it.  The "I-will-invest-when-I-have-the-extra-money" routine, or the "contributing to my 401K this month, shut-it-off next month" routine rarely works.
 
The scenario you painted above is rarely what happens in real-life.  Generally, people are either really GOOD about saving over the years, or really BAD.  I find the extremes to be more common.
 
But yes, if we knew 30 years in advance which investments would outperform by 1.5% over the following 30 years, we should opt for those.