Lousy mutual funds - what to do

turbo6bar · 05-06-2004, 07:09 PM

I have money invested in Janus Fund and Janus Venture. The performance over the past 10 years is 8.56% for Fund and 10.44% for Venture. Both are considered mid to high risk mutual funds. Do those returns sound OK? 8.56% sounds mighty poor, but one could argue things are still down.

I can easily double that return in real estate, but I really need to diversify.

What would you recommend if one had $10k to invest? What would you buy if you wanted to hold for 2 years? What would you buy if you wanted to hold for 7 years? I despise paying capital gains on mutual funds, so how about stocks? I tend to be impatient with my decisions. Would I do alright picking a strong blue chip? I wanted to buy Phillip's Morris/Altria Group because of high dividend yield. Stupid me-it went from the low 30s to $56 now. Doh!!! Any comments on Dogs of the Dow(dogsofthedow.com)?
jürgem

Rot 911 · 05-06-2004, 07:15 PM

Turbo, i am with you on the Janus fund. I have the Janus Twenty and Janus Orion. Orion is doing ok, but I sure would like to know who is picking the stocks on the Twenty fund.

HarryD · 05-06-2004, 08:26 PM

Jurgem,

Long term the Stock market beats most other investment vehicles.

As a resonable estimate (forget the roaring 90's), 8-10% is not unreasonable. If you think real estate is any better, take a look at the Houston market 1980-1990. I was lucky, I bought my house there for $60,000 in 1980 and sold it in 1990 for $70,000. (I did better than most of my friends by the way who ended upside down in the same time period.)

Regardless of what you invest in, if you have a capital gain, you will need to pay taxes on it when you sell the investment. Mutual funds are a convienient investment for the small sum you are considering since you will get diversification that you cannot get with the same amount of individual stocks.

JavaBrewer · JavaBrewer's Garage

Here in CA I've made a 125% return on my real estate investments in 4 years. I give it another 18 months before the party is over.

Bill Douglas · 05-06-2004, 10:05 PM

If you do want to play the stock market, aviod the blue chip stocks, nothing really wild is going to happen. Bet on a few outsiders like http://moneycentral.msn.com/scripts/webquote.dll?iPage=qd&Symbol=lthu This one halves and doubles in value every few months

turbo6bar · 05-07-2004, 05:15 AM

I started investing in Janus Funds almost 20 years ago. I have piddly to show for it.

Harry, if I own mutual funds, I pay capital gains each year because the fund owners buy and sell the stock on a regular basis. If I own stocks or RE, I only pay capital gains when I sell.

I have more than $10k, but I really want to do something special--take risk. Go for it. I don't have any future plans for the cash...maybe buy a house, or use it for a college fund for future children.

lthu looks very interesting.

jürgen

naparsei · 05-07-2004, 06:37 AM

If rates rise, real estate party will be over, especially in highly appreciated areas. Prices are being driven by monthly payments (the affordability of) vs. value. As monthly payments rise on the same house (because of higher mortgage rates), new buyers will hit the sidelines, and prices will weaken or fall. Liquidity drives markets.

joeclarke · 05-07-2004, 07:41 AM

I don't want to sound like an elitist, but unless you're completely detached from the equity markets and have no clue about the basic fundamentals of business financial structure - mutual funds are for suckers.

Well, that's an overstatement. But look at the basics - you're paying a buncha rich (and getting richer) bastards to decide where to invest your money. They win regardless of whether you win or lose. And most of them are absolutely clueless (the markets are not a science, no matter what they try to tell you) and cannot even do as well as the indexes.

In other words, if you bought all the stocks in any given index you would do better than the returns of like 90% of the mutual funds. Even the "dart board" approach to stock picking consistently embarasses the analysts.

Want conservative? - play equity indexes and pay less than half the fees (or even less) of an equivalent mutual fund. Like a particular industry sector? - pick a few representative stocks within that sector and pay virtually no fees. Want more leverage to higher risk? Pick a sector that the "experts" like (for reasons that make sense to you) and find an out-of-favor or ugly cousin within that sector (check out why it's out of favor first).

Check on your holdings once in a while to make sure that your reasons for investing remain valid - don't churn your portfolio on small swings and don't hand wring over peaks and valleys. Buy value, hold and prosper - works for Buffet and a whole buncha others.

Quit feeding the vampires that suck the blood out of your earnings that were made at the risk of your capital. Worst, worst case scenario (and this happens all the time) - people pay brokers to buy mutual funds for them. Use a broker if you really feel out of your element - but never, never let him/her sell you a mutual fund. That's like hiring me to buy a Porsche for you from a Porsche dealer.

IMHO - FWIW

HarryD · 05-07-2004, 07:58 AM

Quote:

Originally posted by joeclarke
I don't want to sound like an elitist, but unless you're completely detached from the equity markets and have no clue about the basic fundamentals of business financial structure - mutual funds are for suckers.

Well, that's an overstatement. But look at the basics - you're paying a buncha rich (and getting richer) bastards to decide where to invest your money. They win regardless of whether you win or lose. And most of them are absolutely clueless (the markets are not a science, no matter what they try to tell you) and cannot even do as well as the indexes.

In other words, if you bought all the stocks in any given index you would do better than the returns of like 90% of the mutual funds. Even the "dart board" approach to stock picking consistently embarasses the analysts.

Want conservative? - play equity indexes and pay less than half the fees (or even less) of an equivalent mutual fund. Like a particular industry sector? - pick a few representative stocks within that sector and pay virtually no fees. Want more leverage to higher risk? Pick a sector that the "experts" like (for reasons that make sense to you) and find an out-of-favor or ugly cousin within that sector (check out why it's out of favor first).

Check on your holdings once in a while to make sure that your reasons for investing remain valid - don't churn your portfolio on small swings and don't hand wring over peaks and valleys. Buy value, hold and prosper - works for Buffet and a whole buncha others.

Quit feeding the vampires that suck the blood out of your earnings that were made at the risk of your capital. Worst, worst case scenario (and this happens all the time) - people pay brokers to buy mutual funds for them. Use a broker if you really feel out of your element - but never, never let him/her sell you a mutual fund. That's like hiring me to buy a Porsche for you from a Porsche dealer.

IMHO - FWIW

In many ways you are correct, but to have decnet, diversified, portfolio of equities, you need more money than many people starting out have available. I agree that once you exceed a threshold, you should look outside of mutual funds but if you are just geting started and only have $10-30k to invest, you cannot get very much diversification without going to a mutual fund type of vehicle (be it open end, closed end, index security, etc). Once you have decent portfolio, individual issues make a ton of sense.

My $0.02

turbo6bar · 05-07-2004, 11:08 AM

Quote:

Originally posted by naparsei
If rates rise, real estate party will be over, especially in highly appreciated areas. Prices are being driven by monthly payments (the affordability of) vs. value. As monthly payments rise on the same house (because of higher mortgage rates), new buyers will hit the sidelines, and prices will weaken or fall. Liquidity drives markets.

I don't buy for appreciation. I buy for cash flow, equity paydown, and tax advantages. My specialty is rental real estate. When buyers are sidelined because of higher rates, they rent my single family homes. Fortunately, my area has not seen rampant, ridiculous appreciation rates. However, I don't want to put all my eggs in the same basket.

I do agree the party will be over for many, but there is always opportunity if one is in the correct position, ergo my post about mutual funds.

joeclarke, I agree with you about mutual funds. When I started investing, mutual funds were the best route for me. Now, I feel I've outgrown funds.

Is there not an Index 500 stock, or can one only buy S&P500 stocks through a mutual fund? Any recommended web sites or references about smart (read educated) investing?
Thanks all, jürgen

HarryD · 05-07-2004, 11:26 AM

Quote:

Originally posted by turbo6bar
... snipperino....

Is there not an Index 500 stock, or can one only buy S&P500 stocks through a mutual fund? Any recommended web sites or references about smart (read educated) investing?
Thanks all, jürgen

Jürgen,

Several of the Mutal fund compoaines offer Index funds (check Vanguard, or Fidelity). These Web sites as well as the other loarge fund Web Sites usually have a section for investor "education". Read what they say with a large grain of salt and be sure it meets your comfort level.

You can also buy a closed type fund that trades on the NYSE but I do not know the symbol.

Like the real estate market (that you seem to have a handle on), you are aware it is hard to make big $$ in a short time without risks in excess of the potential reward. Stocks/bonds/Mutual Funds are the same.

Frankly, a previous poster suggested a penny stock for a quick return. I have been in the stock market for many years. Rather than spend my money on a penny stock, I would prefer to take the same money to Las Vegas, enjoy a few days of gambling, shows etc. At the end of the day, I think I would find that my bank account to be financially about the same as if I invested in the penny stock but without the fun of my trip to Vegas.

joeclarke · 11:30 AM

I hear you Harry - good point but I have a different view.

Mutuals will never get you into anything representing more than small cap risk. That's barely even hitting the radar screen of "leveraging risk for greater capital growth". So - if you're buying a mutual fund and paying some manager 2% to drive 4% growth and 2% earnings on a buncha low risk stocks - how does that make sense? Why do you need to diversify risk on what are implicitly low risk investments?

Particularily when you're starting out - at that point you have much greater risk tolerance. And particularily when the chances are extremely great that that manager will do a worse job than you would do with a dart board picking stocks. You'd pay 1/3 of your return to some guy to do that?

Go buy an exchange traded index fund if you want to diversify - same growth potential as the index with half the cost of a mutual.

naparsei · 05-07-2004, 11:41 AM

jurgen,
Most real estate markets where I've lived have pretty speculative markets (like the SF Bay Area) where is it also tougher to be a landlord due to extremely liberal tenant laws. I have always felt that rental real estate, when properly managed, is a great investment. Part of the problem that market faces, of course, is that your borrowing costs rise as well, and tenant solvency becomes more of a risk as rates go higher (esp. this time, since the "marginal" home buyer has long since purchased a house. The most desirable long term tenant population has mostly purchased.) With rates raising, and a high level of consumer debt financed on floating terms, people could find themselves squeezed. However, if you've been investing in rental properties for a while, I'm pretty sure you know more about than I do - since I have more of a capital markets background than real estate.

juanbenae · juanbenae's Garage

the last two months they've pretty much all sucked.

epbrown · 05-07-2004, 04:35 PM

I'm invested for the long-term so I'm in index funds mostly. My largest holding is Vanguard's Index 500 fund that mimics the S&P 500. Low fees since there's no administration, 34% return over the last year but 11.6 over the last 10. I'm still recovering from the tanking it took 4 or 5 years ago, but at least I know it will recover. Friends have come to me with all sorts of buy recs and get-rich-quick ideas over the years, but the risk usually outweighs any possible rewards.

As to your question: I'd likely throw it into the Index 500 or even a DJI fund until the end of the year and re-assess then.

Emanuel

turbo6bar · 05-09-2004, 06:39 AM

Janus Funds does not offer an Index 500 fund, or any index fund. If I transfer to another company, I will have to pay capital gains tax, correct?
jürgen

pwd72s · 05-10-2004, 05:34 PM

To each their own. Personally, I prefer to NOT deal with any mutual fund family involved in the late round of mutual fund scandals of "after hours" trading.

real550A · real550A's Garage

Do you feel lucky...? Well, do you?

Scottrade = $7.00 online trades.
I don't work for them, but over the last 10 months, the markets have been very, very good to me.

RickC · 08:22 AM

Don't put all your $10K eggs in one basket, diversify. But if you're young and want to bet 10% to 30% on some sector, if it were me, I'd:

For 2 years - raw materials - economy on the upswing, right?

For 7 years - China - hard to see how they will shrink during that time period, though they are a bit overhyped right now, so next year or two might be ugly. - or Berkshire "B" shares - about $2,900 each right now - Hard to see how Buffet will screw up over 7 years either.

The other 70%-90% spread out to cover your bases.

BTW- since we all have an interest in autos, I've done OK by buying auto company stocks and then selling them as I see them reach peaks. For instance, bought GM when Bob Lutz was hired and sold it before the recent drop. Honda is down pretty hard right now, might be a good buy. Last I checked Toyota was way up, so let it fall a bit and hold it for 7 years until it is larger than GM. Bet on what you're paying attention to anyway, and it makes mistakes that much less common. Wish I'd had the money to buy Porsche stock in 1990!

turbo6bar · 05-12-2004, 09:16 AM

Interesting suggestions. I like 'em. I'm already diversified well in real estate and equities. My balance is probably 85/15, real estate/stock market. I tend to believe MY real estate investments are conservative (regular income stream, steady appreciation, few speed bumps), so I am willing to be more aggressive with the stock market.

Here's my thinking:
If I pay off the remaining balance on one mortgage (on rental property), my cash return will be 16% per year. So, whatever I do in the stock market needs to match or beat that return. I think it can be done, but not without legwork to find the best investments.
onward, jurgen