QUIKAG

Thank you. It should be an interesting test. From my studying, it appears quite comprehensive. <----the test, that is, not necessarily my studying.

hpark

agreed....might want a 30% exposure to vanguard internation fund for better diversification.....add a vanguard bond fund for smaller horizons (<5 years).

PanteraKitty

Sheldon Jacobs wrote a couple of good books on investing in No Load mutual funds. Do your own research and you will not need to pay a Broker or a sales fee. There are many no load funds that out perform the ones with sales fees.

Check your local library or Amazon.com or here is just one of what a Google search for "Sheldon Jacobs" turned up.

http://www.alibris.com/search/books/...obs,%20Sheldon

tinkfist

I just heard about a cool one the other day: VICEX aka the Vice Fund. It invests in vice industries. Here is the make up:

24.40% - Alcohol
26.58% - Defense
24.57% - Gaming
20.99% - Tobacco
3.46% - Other

There data from last month looks pretty good...

+ 2.98% - 1 Month
+ 6.62% - 3 Months
+ 0.70% - 6 Months
+10.20% - 9 Months
+19.43% - 1 Year
+17.96% - 3 Year (Average Annual)
+16.74% - Since Inception (Average Annual)

It sounds like a solid investment...people always resort to their vices.

magician

At the risk of stirring up a hornet's nest, why would a 30% exposure to Vanguard's International Fund give him better diversification?

Specifically, why 30%?

More specifically, better diversification of what?

(These aren't rhetorical questions, nor are they supercilious; only by properly understanding the answers can you build a good portfolio.)

hpark

well i'm thinking S&P funds like VFINX are invested in U.S. companies.....I'm assuming you'd want some exposure to European or Asian companies as well. Better diversified meaning you're not exposing yourself just to U.S. companies but companies across the globe.

30% is just a # I threw out there. 70% VFINX, 30% international sounds like a good mix.

magician

What are you trying to diversify? That's the question that needs to be answered.

I looked at four Vanguard international funds: VEIEX, VEMIX, VIDMX and VINEX. Over the last 5 years, 11 months the average correlation of returns of VFINX with each of these funds is over 80%. (Correlations run from -1 to +1, or -100% to +100%; low correlation is good, high correlation is bad. An average of +80% is very, very bad.) The long and short of it is that these funds provide essentially no useful diversification; better returns, but not better diversification.

A mix of 70% VFINX and 7.5% each of the others would have averaged 5.5% annual (compounded) return over that period, with 15.2% standard deviation of returns. A mix of 48.5% VFINX, 44.5% VINEX and 7% VIDMX would have had the same standard deviation of returns, with an average of 7.3% return per year.

happs22

There is a gentleman at Legg Mason name Bill Miller. Look him up. I think this year might be the first time in 14 YEARS that he's not beating the S&P500. He doesn't get the biggest returns on the street, but the guy is incredibly consistent, and rarely loses.

Just remember, in an efficient market, you're going to have trouble doing much better than an index fund anyway. . . Guess it just depends on how much faith you have in efficient markets and/or the ability of a fund manager to find and exploit the inefficiencies (before the investment bankers, hedge fund managers, private wealth bankers, and the rest of the crowd). Gosh, business school sure teaches a lot of buzzwords!

magician

It's easy to beat an index fund in an efficient market . . . if you're willing to accept more risk (whatever that is) than that of the index fund.

happs22

Point taken, I was just giving very basic advice. Bigger risk, bigger return. Still better than T-bills!