Mutual Funds - General Discussion

Top 614. Aug 12, 2004 9:21 PM

» Normxxx - Dollar Cost Averaging

Dollar Cost Averaging
Click here for link to full article: http://www.cross-currents.net/monthly.htm
By Alan Newman, CROSSCURRENTS | 11 August 2004

$500 a month since January 1997 nets only $6766 in appreciation over the seven and one-half years. This was almost matched by riskless 3% treasuries over that period, and easily exceeded by returns for 5% municipal bonds.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 615. Aug 17, 2004 10:28 PM

» radiodude - ING to Withdraw $5 Bln from Janus Funds

I like INGdirect.com, I don't care for Janus.
I don't know if the improper trading done by Janus contributed to the ING action, but even if unrelated, it's Good to see the "scam" mutual fund managers feel some pain.

http://story.news.yahoo.com/news?tmpl=st...

ING to Withdraw $5 Bln from Janus Funds

By Jonathan Stempel

NEW YORK (Reuters) - ING U.S. Financial Services said late on Tuesday it will withdraw about $5 billion from Janus Capital Group Inc. funds by year-end.

Denver-based Janus, which in April settled regulatory probes of improper mutual fund trading, announced last month that an institution was withdrawing the funds, but did not name the client.

The sum represents about 3.9 percent of Janus' $129 billion of assets under management as of July 31. Those assets have declined more than 50 percent since 2000.

ING, a unit of Netherlands-based financial services company ING Groep NV, will drop Janus' Aspen funds from its variable annuities and defined contribution retirement plans. It said it has entrusted Janus with large sums of money since the mid- to late-1990s.

-- posted by radiodude

Top 616. Aug 30, 2004 10:12 AM

» Normxxx - Motley Fool: Let Investors Beware

Penny-wise, funds 'Foolish'
Commentary: In Motley Fool's new venture, let investors beware

By Chuck Jaffe, CBS MarketWatch.com | 2:23 PM ET Aug. 29, 2004

BOSTON (CBS.MW) -- In the late 1990s, Tom and David Gardner -- the brothers behind The Motley Fool online investment community -- regularly ridiculed mutual funds and the people who bought them.

Their key statistic back then was that nearly 90 percent of all funds failed to outperform the Standard & Poor's 500 Index ($SPX). Never mind that 98 percent of the indexes tracked by Morningstar failed to beat the same benchmark over the same time period. This was their proof that owning actively managed funds was a "wise" thing to do.

In the Motley Fool world, "foolish" is good and "wise" is dumb. The only fund that was "foolish" to buy -- meaning "smart" -- was a low-cost S&P 500 index fund.

Fast-forward a few years.

The market has been battered, but funds look a little better. Today, in hindsight, you can say that about 1 in 4 funds has beaten the S&P 500 over the last decade.

And that's why the Motley Fool earlier this year created a newsletter for fund investors (the same class of people whom Motley Fool once derided as dupes and suckers) in hopes those fools (note the lower case) will pony up a $149 subscription to earn their capital letter and become Fools.

You knew the change of heart -- or profit motive -- was complete when the sales pitch for the Motley Fool Champion Funds newsletter said: "Passive investing is too expensive. Too risky. Too unsatisfying."

But in promising fund information with "No jargon. No spin. No snow," the Motley Fool is trying to spin away its past.

Investors should be smart enough to see through that.

This is hardly an all-out bashing of Champion Funds. The newsletter's content actually is quite good. The focus is on selecting funds that have low expenses, superior stock-picking and managers who have been on the job long enough to show that they can deliver the goods.

Aside from an obsessive comparison to the S&P 500 -- which isn't the appropriate benchmark for all funds -- you'll be hard-pressed to find anything in Champion Funds that experts would quibble with. What's more, Shannon Zimmerman -- the former Morningstar analyst who runs Champion Funds -- puts out time-tested, smart-investing messages, using the Fool's traditionally clever delivery.

But even that doesn't live up to the Fool hype machine's promise of something smarter than the rest of the pack. In fact, Champion Funds is simplistic enough that it can easily be replaced by services that are free or by newsletters with long records of picking funds well.

"The goal," Zimmerman said in a recent interview, "is to reward folks who do their homework over time by recommending funds which have what we think it takes to beat the market over the next three to five years."

For the investor who wants to do that homework, however, it's pretty easy to go to a site like Morningstar.com or LipperLeaders.com to screen funds based on low costs, returns, manager tenure and more. Premium memberships at these sites generally offer more sophisticated tools and analysis, as well as more detailed fund recommendations.

And if receiving a newsletter is particularly appealing, there are some -- Sheldon Jacobs' No-Load Fund Investor or Litman/Gregory's No-Load Fund Analyst pop to mind -- with long records of superior fund-picking performance.

If the Fool's own contention is that manager longevity is crucial to proving greatness, shouldn't that apply to newsletter editors too? Zimmerman may someday prove to be at the head of the class, but that day won't be tomorrow.

And while Zimmerman has been a fund supporter for a long time, the Fool as an organization has not been fund-friendly. When it comes to investment advice, consistency is crucial; the last thing you want is a 180-degree direction change from the people at the top.

Such changes generally have profit motives behind them, unless yesterday's thinking had merely been wrong. However, in a recent interview Tom Gardner hardly suggested that he previously had been too hard on funds.

The Fool has hyped its brilliant ideas in the past, starting stock portfolios supposedly built on a better way of thinking, but which were buried when they fell short of expectations. Paid newsletters are relatively new for the company; they make good business sense -- giving it away free doesn't help the bottom line -- but that doesn't make it right for consumers.

In defense of the newsletter, which clearly met a demand from some portion of the Fool community, Gardner said he believes Zimmerman can bring the same foolish approach to funds that has attracted investors to Fool.com's stock advice.

"The overarching message is that if you are willing to do your own homework, you can probably beat the so-called experts with one hand tied behind your checkbook," Gardner said. "That's certainly true of the message we have had about doing your own stock research, and I would argue it is now true of the message we have about doing your own mutual fund research."

Still, the Fool talking about funds feels more than a bit strange.

"They're asking you to forget their past advice that you should not buy mutual funds and saying instead that now you should pay them for advice on just how and why to buy them," says Jason Zweig of Money magazine, a long-time Fool critic. "It's a head-scratcher."

It sure is.

And even if the advice in the newsletter is good, investors should take the entire publication lightly and stick with more-established options until they're confident that The Fool really has changed its tune and won't go back to ridiculing fund investors the next time it suits business purposes.

Chuck Jaffe is a senior CBS MarketWatch columnist. His work appears in dozens of U.S. newspapers. His MoneyLife with Chuck Jaffe radio show airs daily from 11am to 1pm ET on AM-1060 WBIX in Boston and can be heard live online at http://www.wbix.com.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 617. Aug 30, 2004 10:34 AM

» radiodude - Re: Motley Fool: Let Investors Beware

In response to message posted by Normxxx:

In the Motley Fool world, "foolish" is good and "wise" is dumb.

Whatever!

I never liked these guys. They never impressed me that they knew what they were doing, and now that they offer yet another newsletter, it's another reason to steer clear of these fools.

-- posted by radiodude

Top 618. Aug 30, 2004 10:52 AM

» Normxxx - Re: Re: Motley Fool: Let Investors Beware

In response to message posted by radiodude:

You probably mean "wise" -acres!

But seriously, I occasionally have glanced at their product and it seemed OK, if often naive. Unfortunately, they loaded up on "rule-breaker" stocks and got killed in the Bear.

-- posted by Normxxx

Top 619. Sep 2, 2004 9:19 AM

» Normxxx - Fidelity Slashes Fees

Exchange Fund Squeeze
Fidelity Investments Slashes Fees on Index Funds Amid Rising Competition

By Meg Richards, AP | 2 September 2004

N E W Y O R K, Sept. 2, 2004 — Leaping into a burgeoning price war with low-cost exchange traded funds, Fidelity Investments has slashed fees on five index mutual funds widely used in group and individual retirement accounts.

In a decision announced Tuesday, Fidelity said it would cap expenses for the five index funds in its Spartan series at 0.1 percent. The move makes them among the lowest priced stock funds available, even less expensive than similar portfolios offered by The Vanguard Group, long known for its low-cost products.

Aside from taking aim at traditional competitors, fund experts say Fidelity has positioned itself well to capture investor dollars that might otherwise go to low-priced ETFs.

"Whenever fund companies compete on costs, that's a huge benefit to investors," said Russ Kinnel, director of fund research at Morningstar Inc. "It's certain Fidelity will lose a little money on this, but the idea is by being the cheapest they'll attract more money and gradually be bringing their costs down a bit. By keeping investors in-house, they'll make money on a lot of their other funds."

A number of fund companies have cut fees over the last year, and at least some of the changes, particularly for high-priced actively managed funds, came as a result of the mutual fund trading scandal, Kinnel said. But Fidelity's decision to trim costs for its index funds is more likely a response to price competition from ETFs.

With the change, fees for the Spartan 500 Index Fund and the Spartan U.S. Equity Index were cut from 0.19 percent; the Spartan Total Market Index was chopped from 0.25 percent; the Spartan Extended Market Index was reduced from 0.40 percent and the Spartan International Index was slashed from 0.47 percent.

By way of comparison, the Vanguard 500 fund, which like the Spartan 500 tracks the Standard & Poor's 500 index, charges an annual expense ratio of 0.18 percent. The Vanguard Developed Markets Index, which is closely correlated to Fidelity's Spartan International Index, charges 0.34 percent in fees.

Fidelity also standardized the required minimum investment for the funds, setting it at $10,000 for an initial purchase and $1,000 for subsequent purchases. Vanguard requires a minimum initial investment of $3,000. In both cases, minimum requirements are waived for anyone investing through a retirement plan, such as a 401(k).

Jeff Carney, president of Fidelity's retail division, said the changes are part of a wider effort to make the company's retail business more compelling, and more competitive. Fidelity, long known for having an array of no-load fund options, removed front-end charges on all its retail funds late last year, lowered commissions for certain trades on its online platform and in January eliminated annual fees for new and existing individual retirement accounts.

"We're trying to grow our market share, and we think moves like this will allow us to do that," Carney said. "The winner on this is definitely investors. ... How we win is if customers decide to do more business with us."

Early Stages

While ETFs have penetrated the institutional market, and are becoming more widely used in managed accounts, they are still in the early stages of cracking the retail market, Carney said.

"Index funds are more mature, they're part of the natural part of what people think about," Carney said. "This now puts the fees of index funds in a better position relative to ETFs, but it still comes down to the individual preference of the investor, as well as your tax situation and anything else that goes into your planning."

Noting that Fidelity deals with ETFs as part of its brokerage business, Carney said the company plans to launch a new portion of its Web site this fall to better explain their benefits, and to help individual investors understand which ones to choose and why.

ETFs, which track indexes and are traded like stocks, have become an increasingly attractive alternative to equity mutual funds because they offer tax efficient market exposure at rock-bottom prices. The two largest ETFs tracking the S&P 500 carry annual fees of just 0.12 percent and 0.09 percent, respectively.

On the downside, ETFs are also subject to the same transaction costs as stocks, meaning you're charged a commission whenever you buy new shares. For small investors, especially dollar-cost averagers who add to their portfolios on a regular basis, these charges can eat away at returns. Mutual fund investors pay annual fees based on expense ratios, but are generally not charged an additional commission when they purchase new shares.

Nonetheless, ETFs have grown substantially since the first one was launched in 1993. At the end of 2000, total ETF assets were about $65.6 billion; now they stand at $172 billion, according to the Investment Company Institute, a research and lobbying organization for mutual fund companies. Through the first seven months of this year, ETFs saw inflows of $23.5 billion.

Fidelity's decision to trim fees for its index funds, "may to some degree reduce the growth of ETFs," said Kinnel, of Morningstar. Their action puts them ahead of the curve, because it comes before many retail investors have gotten comfortable with the new product.

"If you're looking for an S&P 500 fund, there's not much point in buying an ETF," he said.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 620. Sep 3, 2004 1:49 PM

» Normxxx - Inflows and Outflows

BOSTON (CBS.MW) -- Investors committed a net $700 million to stock mutual-funds in the five trading days ending Sept. 2, slightly less than the $900 million reported in the previous week, research firm TrimTabs said Thursday.

Buying interest is slower than at any time in the last decade, TrimTabs noted.

"They sold in May and went away," said Carl Wittnebert, director of research at TrimTabs. "Except for the bear market years of 2001 and 2002, the May-August period had the lowest equity inflows since 1992."

The closely watched figures, a measure of bullishness in stock and bond funds, showed domestic stock funds collected $800 million in new cash for the second week in a row.

Meanwhile, investors pulled $100 million from funds that hold international stocks, reversing inflows of $100 million the prior week.

Bond funds had outflows of $500 million, continuing last week's exodus of $900 million from these offerings. Hybrid funds, which invest in both stocks and bonds, experienced inflows of $900 million, following up on an inflow of $500 million the week before.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx