$850, 000 portfolio, hates fees, now what?
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NOW is a good time to be investing in long bonds?!!!
It's EASIER to beat indexes as a large cap manager?!!! Sorry, but I'm going to have to completely disagree on both counts. Long rates are at historic lows and have little room to maneuver lower. Whan rates inevitably rise, long bonds will be the first to get creamed, and will get proportionately more damage. When I can get 3.5% in a money market fund, there's not much incentive to buy a 30-year treasury paying 4.25%...the risk/reward is just terrible at these levels. Likewise, large cap markets are by far the most efficient ones since large cap stocks naturally have much more trading volume and analyst coverage, making outperformance considerably more difficult. Do yourself and your clients a favor...at least go through the investment module of the CFP and when you've passed that, come back and tell us if you still feel the same way...I'm betting no.
5 Year Large cap (S&P)
Index 11.54%
Average large fund 14.64%
5 year mid cap (MSCI US MID CAP 450)
Index 16.08%
Average fund 14.34%
Please stop making a fool of yourself. (You are also using stupid statistics you don't understand and aren't true comparisons to do it).
5 Year Large cap (S&P)
Index 11.54%
Average large fund 14.64%
5 year mid cap (MSCI US MID CAP 450)
Index 16.08%
Average fund 14.34%
OK, there are proportionately more lousy mid-cap managers than large cap managers during the past five years. That doesn’t mean it’s harder for mid-cap managers to beat an index. It simply means that the available pool of talent performed relatively poorly when compared to large cap managers. Does anyone else here disagree that large cap markets are more efficient than small caps and thus harder to beat over a given period of time?
indexes are for the MOST efficient markets (large caps) where active alpha is harder to obtain. this jones guy is totally wrong, and is making a fool of himself.
it is part of the jones culture to constantly use hypos or whatever to look at past results, when the real issue is managing risk MOVING FORWARD
Mid & small managers have difficulty because of market impact costs. (you may want to read up on that as you are way out of your league right now) Cash flows of actively managed funds (mid & small) destroy performance.
ok my last post was too short. what I mean to say is that obviously active managers capitalize on less efficient markets—they can find opportunity in volatility. more efficiency=less opportunity. very very basic
Okay, I’ll do a little hand holding for you
Market Impact Costs (101)
MARKET IMPACT COSTS
Unfortunately, trading costs do not end with commissions and bid/offer spreads. Active managers incur market-impact costs, too. Market impact is what happens when a mutual fund buys or sells a large block of stock. The fund’s purchase or sale causes the stock to move beyond its current bid (lower) or offer (higher) price, increasing the cost of trading.
BARRA Inc., a Berkeley, California–based research organization (www.barra.com) studied market-impact costs and found many factors (fund size, asset class and turnover) can influence costs. BARRA noted that a typical small-cap or mid-cap stock fund with $500 million in assets and an annual turnover rate of between 80% and 100% could lose 3% to 5% annually to market-impact costs—far more than the annual expenses of most funds.
For the period BARRA studied, the PBHG Emerging Growth Fund happened to have the highest estimated market-impact cost among small-cap or mid-cap funds—5.73% annually.
Look, your statistics are wrong due to style drift, i.e many of those managers dip down into midcap-helping (or up into large - hurting), and into international waters. Therefore using the S&P is not even close to an accurate comparison. I'm pretty much a purist, I use indexes across the board as often as possible. I've never even heard someone try to argue that it's easier to beat in large cap. If you can get five established posters on this site to agree with you I will eat my hat. (Or one well respected authority in the field.)
it’s hard to beat benchmark in mid and small area due to market impact costs. this is why so many of these funds end up closing to new investors as it gets very tricky gettting in & out of small names.
What the %$@! Read the tape! You just got done saying how smart AMF are because it's easier to beat the large indexes, and showing us stats and everything.I’m talking about mid cap and small not large.