I guess Nygren isn't able to pay off Morningstar like he used too? Back in October, Morningstar pointed out that Nygren has invested $1 million of his own money invested in his trash fund. But is this investment soley for the purpose to dupe new investors into believing he eats his own stew? If the truth be known, Harris Corp, the owners of this fund, has paid this fool 10's of millions to manage it. Something that Morningstar undoubtedly knows but fails to point out.
Don't be fooled people, Nygren is a moron and doesn't even deserve a job after his WaMu castastrophe. He feels YUM will pull him through? Think again about this guy's ability before potentially throwing your money away. Who cares if he beat the S&P. This fund continues to lose and will most like move much lower.
I agree with your views. If I were advising a young investor, with 30 plus years to retirement, I would recommend the Vanguard Total World stock market fund and maybe a bit of the Vanguard Total World bond fund, as the only investments to make.
These funds save at least 1% a year in expenses. Compounded over thirty or more years this is a huge amount of money.
Managed funds need to have some special feature to interest me. As a focused fund, OAKLX has such a feature, as discussed in previous posts. Also, the investment advisor, Harris Associates, requires its managers to have substantial investments in the funds they manage. I'm not sure this is a wonderful idea, but they certainly feel the effect of their mistakes.
I believe that in years to come the merit of low cost, unmanaged index funds will become apparent to most investors and managed funds will fall by the wayside. Charles Schwab has created a few of its own ETFs with very competitive expense ratios, and no trading fees in a Schwab account.
I suspect this trend will continue.
Vensh, I appreciate your thoughtful response to my rant. Sometimes I get carried away. Still have a modest number of shares of Oaklx, no big deal, and to be truthful I sincerely hope that Nygren makes all the right moves in the future. I doubt that I could have done better (well maybe) than he did in the past ten yrs. Just resent the high fees, I guess. Pro's should not make some of the mistakes that were made. Heck, I can make mistakes like WaMu but I'm not a professional and being paid big bucks. My beef is that professional fund managers are not much better than amateur's, but they get paid millions no matter how good or poorly they perform. I have done as well or better investing in individual stocks, with no expensive fees involved and I am sure that you have done the same.
If you like 2.5% ea. yr., buy oaklx, that is for the long term. Majority of years it will be down, ocasionally up, and hopefully you will be in a position to sell in the frequent years that it will be up. It's way too mind boggling for a mutual fund, drives you crazy, and for what? To pad Nyrens salary? Yep, that's what it's for. I don't like Nygren, think that he is incompetent, has no business running this fund. And I don't give a hoot for anyone who disagrees. Don't bother to respond.
OAKBX has performed much better than OAKLX over time, and will most likely continue to do so. The stock market will continue on a bearish path for many years to come (IMO), so conservative funds that focus on defensive picks and high yields should outperform in the coming decade.
Today, Morningstar confirmed that Select is part of their 401k plan. So Morningstar puts their own money where their mouth is.
Their only complaint? Expense ratio is a little too high.
I must admit, Nygren has been redeeming himself of late(not to say I'll invest in this fund--I do my own stock picking). I do like to follow funds though, to see what they hold. The concentrated funds are more fun to watch, since they have big ups and big downs. For the life of me, I cannot understand why any sane person would make such huge bets, when there are enough great picks out there to make up a fund that would be less volatile AND produce market beating returns. I have to believe that ego's get in the way of common sense--everyone wants to hit home runs and be a hero.
Aura, As noted before, I applaud your intrepidity in managing such a large portfolio. Since you’re getting good results, I don’t know why you use mutual funds at all. The “more than enough people and resources to handle those [research] demands" ain't free and the cost is coming out of your pocket. I would suggest you look at some index funds to see if any fit into your sector allocations, with much cheaper annual expenses.
I owned PREMX for awhile, but sold it when VEU came to my attention. Emerging markets are about 10% of its holdings which I think is a reasonable allocation - and the meager .2% expense ratio gives it a big edge..
As for long term results, I try to look at 20 years results to see how something weathers the vagaries of bull and bear markets. I know that JM Keynes noted “in the long run we’re all dead,” but I find the discipline of looking back a long ways is helpful.
I also had Templeton Global Bond Fund. I sold it to buy the ETF, GIM which has essentially the same portfolio, the same manager, and a much cheaper expense ratio. It has been a hairy ride because the ETF has for long periods traded way below net asset value. I figured what the heck - I’d be getting new shares from the monthly distribution at a bargain price. When it traded last November at a more than 20% discount I bought more. This happened again in March, and I bought more. As the price rose closer to just a whisker below NAV, I was seriously over allocated and sold half my holdings last week to buy some DBC and add to my VEU stake. I still have some money to deploy and need to do some number crunching to see where I’m under allocated.
Hey Vensh, I think we are on the same page in our view of precious metals--I too plan on having minimal exposure to that sector(around 3.5%).
As for NVOSX, I don't know how the index funds stack up against it, and my porfolio has beaten it anyhow--but I did find a stock in it's top ten holdings that I want to purchase/add to my portfolio (FFIV, a tech stock).
Concerning the concentrated/non concentrated portfolio debate, I did some numbers crunching, comparing my 50 stock E*Trade non retirement stock portfolio with my 116 position(it contains four mutual funds)401K portfolio. I compared three stats: The previous five years avg annual return. The dividend yield, and the big 2008 percentage loss. The 50 stock portfolio results were-- a 7.59% avg annualized five year return, a 2.62% dividend yield, and a -28.0% loss in 2008. The 116 position portfolio results were--a 7.27% avg annualized five year return, a 2.99% dividend yield, and a 30.5% loss in 2008.
Though, the 50 stock portfolio did do slightly better(with the exception of a lower dividend), part of the explaination for that is due to the fact that I slightly underweighed the real estate and conglomerate sectors in the 50 stock portfolio. I might mention that all of the stocks in the 50 stock portfolio are also held in the 116 position portfolio.
In concern to the question of just how sufficiently manageable is a larger portfolio, I believe the institutions have more than enough people and resources to handle those demands. As for the individual(myself), one does have to have an excellent memory -- and a desire to research in addition to picking stocks with a high probability of long term staying power. IMO, if you pick well run/dominant co's to invest in, there will be less need to constantly monitor the stock. I'm not saying it is easy, or that everyone should invest that way--but I believe success can be had. I do agree that most managed funds are crap, and it is not surprising the indexes beat most managed funds. There are four funds I like enough to own--PREMX, TGBAX, MACSX, MAPIX.
I view precious metals and commodities as high risk inflation protectors precisely because, as you note, they “have terrible long term performance.” This is because they yield zip, unlike the companies that mine and fabricate metals and grow and distribute commodities. I was a gold bug in the early seventies and when I closed the position in 1974, gold was in the 800's. Now, 35 years later, it hasn’t moved much further! IMHO, the best inflation protection has been, is and likely will always be a properly constructed common stock and bond portfolio. Therefore I’ll keep my stake in this area to no more than a single digit percentage of my investments.
As for NVSOX, it has an expense ratio of 1.2%. As a long-term investor, what makes you think you’ll do better with this than with an index fund, such as NAESX, with a ratio of only .23%? That’s nearly a whopping 1% annual difference! Since you spend so much time analyzing stocks, what makes you think those guys will be any better than you?
I don’t think a “concentrated portfolio flies in the face of common sense.” It’s just a different style of investing - with higher risk, but the potential for higher reward. Nygren - and most other fund managers - are not interested in investing in “great companies” but rather companies whose prices they thinks are good values. Warren Buffet invests in “great companies” but his concoction can be dead money for years and years. No fund manager has the stones to do that with the unbearable pressure to report quarterly earnings and print a chart measuring the fund’s performance against some benchmark.
I think that the more stocks you add to a managed fund, the more you are headed to “diworsification” by lowering the odds of matching the market indices over time. Who the hell can “track the finer details” of a 125 stock portfolio? You’d have to have dozens of Oompa Loompas working day and night just to keep up with news, let alone drilling deep. If you want to depart from individual stock picking, in my view an index fund is the way to go. No fuss, no muss, much cheaper and the best returns over time. (If you buy an S&P 500 fund, you can never do worse than the index’s performance.) Academic studies that show 95% of managed funds do not beat the indices over 20 year periods. To me, this suggests that investing in a managed fund is gambling that your manager will be one of 20. I don’t like those odds. An exception may be your objective “to invest in areas that are hard to access in terms of both research and purchasing.”
Over and out.
I think OAKLX holds around 21 stocks in it's portfolio, and we all remember when the fund had around 15% in Wamu stock. I know I've stated this before, but I just think Nygren--or anyone for that matter, is nuts to have such a concentrated portfolio, when more stocks and more sectors would have surely benefited this fund enormously over the past ten years. There are vastly more than just 21 great companies out there, so the super concentrated portfolio arguement flies in the face of common sense. The only benefit I see from a super concentrated portfolio is that it is easier to track the finer details of each stock, but that is all. IMO, I think 40 to 125 stocks is ideal----there IS a point where one can have too many stocks---to the point of being just plain silly.