I can't understand why on a board that is supposed to be composed of investors nobody does any research before responding to a question.
A poster asked about SSGRX and was told that she had already paid her fees for being in a load fund. / !?* Fees on load funds are higher each year because they funnel money back from the fund to your advisor. The fees for SSGRX(Blackrock Global) are, $2500/(per 10K invested) more than those for a Fidelity fund, FSESX, in the same Natural Resources sector. Check on Smart Money Expenses Page. Get the quote for either of them and at the bottom of the expenses page add the other and select the 5yr option.
In fact in the last 2 years SSGRX has done the worst of the 4 Natural Resources funds I tracked (VGENX,PRNEX,SSGRXand FSESX)
Since 1996 SSGRX has risen 300% vs 500% for FSESX.
On anything 1 year or less SSGRX has done better than the competitors so if you are a short term investor you have only lost the 5% for your load which has been offset by the 1 yr returns. Realize that if you reinvest dividends the load is taken off there as well.
Sharpe ratios are a complex math formula attempting to find out how much risk you take for return. They are not fixed but fluctuate based on a fund's performance SSGRX ratios are good because of its excellent 1 year numbers but 3year and above numbers are similar for all in the group.
SSGRX 1Y 3Y 5Y 10Y
Sharpe ratio 1.76 1.23 1.53 0.77
Sharpe ratio 1.31 1.20 1.22 0.55
Sharpe ratio 1.27 1.35 1.52 0.72
Sharpe ratio 1.15 1.20 1.52 0.79
That is shortsighted. Your funds can be underperforming without you taking a loss. Finding out they are at least matching the index for their sector/class allows you a quick way to be sure the funds you selected are at least average. Otherwise why would you want to be in them? To make the manager rich?
Waiting for three alarm status is a very conservative stance. A fund has to have been underperforming enough to drop its 5 year numbers, 3 year numbers and 1 year numbers below the class average, something that 1-2 bad years in 5 won't do. Buy and Hold is not an excuse for lazy.
Ok, thanks for the correction and clarification on 12b-1 Rat. Looks like i got 12b-1 lumped with backload sales charges, the latter can disappear if you hold the fund long enough i'm pretty sure, i forget whether that was for class b or c shares. 12b-1 i guess from your description are taken out of fund assets and paid to the manager annually, no deferrment, no possibility of disappearring before being paid.
Really no significant disagreement on substantially lower 1, 3 & 5 year performance compared to peers. 3 and 5 year performance figures should not be so much affected by a short term performance factor to be so different from peers, but it can happen off a very unusual confluence of events. That's all i'd be searching for. A sudden high degree slide downhill rather than a low degree negative slope peer comparison. The latter, long term poor performance comparison, probably no question the fund's not the best thing to be in.
Fundalarm does what you, by rights, would do for all your funds yearly: compares their performance with the closest market index and sees if they are above, below or equal in the 1,3 and 5 year periods. I would have to have a compelling reason to keep a fund that had performed significantly below its sector in 1,3, and 5 year periods (three alarm fund). Fundalarm also gives a risk measure for each fund which is not like so many based solely on volatility. It also shows you inflows-outflows in 3 months.
It sometimes helps when you are emotionally attached to a fund to have the performance vs cohorts in black and white. Similarly if you are worried about short term poor performance the 1,3,5 vs category index can give you comfort and discipline to wait it out. CGMFX is the lowest risk category and a no alarm fund on Fundalarm.
Back end loads are not related to 12b-1 fees. 12b-1 fees are annual fees for marketing and promotion and are not an expense incurred on selling shares. The fees paid to brokers are often hidden in 12b-1 category. "The ICI said 63% of all 12b-1 fees were used to compensate broker-dealers and other sales channels, 32% were used for administrative services, and only 5% were used for advertising and promotional activities, which was the original function."
In the case of SSGRX the broker fees are not listed in the 121-b component but can be estimated by subtracting the managers fee from the total fee charged.
The issue of deciding whether a fund is performing well is more complex than it appears especially in a taxable account. A fund that is reported on M* as 20% 1yr may have lost 4% or more on taxes vs less than 1% on another fund that seems to be a poorer performer at 18% 1yr. The true return for the first is 16% and for the second 17%.
The difference in expenses between a ER of .7 and 1.29 would lose you an additional 0.5%.
It is also worth comparing the risk you are taking to make the return which is where Smart Money's risk charts and Sharpe values from M* come in. Often you find that you have a higher level of risk with less return and that is worth knowing.
Some how I knew you wouldn't want the link, that's why I asked and didn't provide it.
I have 2 funds that are creeping into the most alarming list (3-alarm). It was ok when they were in the red for the 12 months, but now it's in the 3 yr performance. And based on the stockcharts they are under the s&p.
Here's the link, take it or leave it! LOL
"Based on the performance for the 12 months, 3 yr and 5 yr compared to the index or benchmark."
Ok, got it now, performance. Doesn't look too good if it's underperformed all alon. They might have some type special situation where they were outperforming peers for a long time and now underperforming. That underperformance could skew not only recent performance but significantly effect the year to date and even the 12 months figure, less so farther back. Just as cgmfx past month performance has overshadowed all that good performance over the months preceding.
Thanks for offering the link but won't need it Sea. No, never heard of fundalarm before this. Regards
He brought up fundalarm, it's a tool! Based on the performance for the 12 months, 3 yr and 5 yr compared to the index or benchmark. Ever hear of fundalarm? If you would like the link I will be more then happy to provide it.
What reason(s) turning into 3 alarms? Fees, performance? I don't remember you mentioning just why when you first brought it up, maybe i skipped over the reason. I do that you know 8>). Probably just figured since we were into fee dicussion i took it for granted to be that and the mind skipped to other words.