Manny Schiffres, Kiplinger

Well the stock market is behaving as it often does on a Monday. Behaving but I see nothing but -- in front of hey Barry it's all -- have -- -- Dow is down forty points NASDAQ down fourteen S&P down five. Gold trading down 140 and you got that senior US treasury down slightly from the open at one point 802 toilets even trading down seventeen cents to 9758. I paid 373. Gallon last night and hopefully enable collapse any further -- -- many shippers -- he's paid for gas many carried on a. Arafat created gallon you're down in DC area that I am now well. He -- sets par for the course did you live in DC or do you -- out in -- I I do if indeed it has learned. Not -- Shipley. You know they I read your article about 2012 mutual fund rankings. Great peace and wanted to talk to you about different categories of mutual funds. -- -- interject something sure you get started -- Bob. Though the data in in the article you read -- June 30. So you'll be 1351020. Year returns between periods. If you pushed the date up a little bit yeah that is through what they've Friday BCA remarkable improvement in return. And that this underscores. -- the lineup and -- about mutual fund dated and investing statistic the general yup there's spies their lies and statistics. And what happened was the market went down sharply at the beginning of that the period that is thus starting in July. The 2011. Through or rock the red October 3 because -- the market spent almost 20%. So when you look at these when he returned to June 30. You start with the a decline of nearly 20% and then you're catching up throughout the periods of the one you return. Lascivious -- but it -- there it was 5%. Now we've moved ahead. Six or seven weeks since then and guess what the when he returned yes of people under -- 21%. And you were comedy about the market that are showing red on and on Monday which it. Camby -- which is somewhat common right. But we're having a real big Goodyear we are yes to people runners up 14% -- date -- -- and no that's well above historical averages. Felt so let me -- quote we just had little let me ask you -- when you're buying a mutual fund because we had a -- on for Morningstar earlier and -- -- talked about international funds which kind -- the last couple years international mutual funds have just been getting hammered of course yes. Lou with time horizon the -- would you recommend one of our listeners consider when they're buying a mutual player. Well did the simple answer the longer the better to but. You have to be very careful -- but with trailing return that is when you look at 13510. What are your returns because. -- one bad year. Can throw the entire analysis off kilter yeah. And so what I like to do is yes I I I my first cut is to -- say look at but instead of -- formed their benchmark known it yes people voted or. The MSCI you spend extra whatever the look -- -- which ones about the former over let's take five or ten years. But then look at the year to year performance and what I like to see our -- is that. Our average to above average. Most of the time -- but state figures out of 101000007 years out of the seven years out of 104 years at a five but what what you fight is that buttons that. Are consistently average to above average -- -- may be stellar yet. Don't tend to deliver the goods over the long periods of time. So again. You have to tread very carefully with those trailing returned to -- is dedicated. Oh. Take a what period target look at it you can really be thrown off by what marketed done. -- went to how important is it when you have a manager change you know I've -- -- situations where. You know the manager will leave the small cap fund in new guy will come in in the fund just tanks they're right there when that happens so when you're doing your valuations. -- take that into consideration. Absolutely we do take into consideration. But it's it really varies so the nature of the shop. Give an example. One of the funds that used to be a particular point five. Was which are the records that are recommend it was note but but called -- grows. And -- the -- was founded in 1984 by followed him Rick Astor court veritable expert California edit it wasn't a super -- bump but yet completed assets by the time well what evidence I've that was said he. It passed away last year and this is a -- that was intimately associated. With its manager -- He watched the fund up and he ran it that throughout its entire history. So when he passed away yes he had a co manager who Pete retired several years earlier and but that this is situation where we sell first and we're gonna watch the manager over the course but -- better over the course of time -- -- very -- big shot. Like fidelity or fuel prices. Yes the measure matters but these -- has such deep -- -- that if you don't have to tell immediately. You did you do you you can you can stick but -- and and keep an -- -- -- over time I mean you can if you want to but it's better. Crucial decision that it would be with the family that's typically associated with -- one particular manager. Near extinct -- -- what do you think about mutual funds in general I mean they'd been suffering a lot from outflows frighten me they can get. I -- stock but did so yeah me and by -- it's got to be well I did the first question is. You have a better alternative. And let's say we're talking just got -- but yet are you gonna become a stock picker in yourself. Yes if you owned apple and that was -- -- stock you don't extra -- well but you have the road you run the risk of a one stock portfolio in. We've been advocating apple up -- do it it's a wonderful stock which they could speak to do well despite the fact talked about a 600 dollars -- -- wrote we -- stock but. I mean if if you have apple is. Twenty or 30% of your portfolio I would be surprised if many people do have a evidence that large. Fortune to be -- depreciation. And you're taking an experiment of the individual stock risk. So they'll -- a mutual funds of course would be managed accounts which have their own problems. And that of course ETF switcher reform mutual fund that would NE TF your best invest in index and that -- the real question is do you wanna go we've. With indexing or or managed. Approach didn't and there are you can make an argument both sides and of course he would be investors have had a bad recently because the past year at least it's been a year through June 30. Very very few actively managed funds were able to be there indexes and a lot of that had to do the nature of the markets where the markets were either. Moving all up we're moving down in unison and when the market -- that that's consistent -- war over that period there's very little opportunity for measures to add value. -- you talking about correlation right that's a technical report can actually. Right everything all -- were correlated at all stocks were correlated. But does -- well I say all agreed essentially all. All along that I had a veteran -- all the utility stocks would go up -- telecoms would go up there. -- I really don't go down. You take it to me pin and Verizon the two biggest Telecom -- American -- -- protect coral is just a little of the papers them. Does it doesn't matter which one -- they're both right we have had a very tough for Britain if we're index super active badgers to shine a -- -- a new way that we do. I have a that said we we get to 225 which is point five actually managed funds and all the debate it -- that huge bank of indexing of course. Is that the speeds are so much lower the average -- -- -- four point 1% and in annual expense ratio. And the average diversified domestic. Stock fund expense ratio is about one point three so if you can't compare one the average two -- Linux on. You've got a one point two percentage point hurdle to overcome. Every year I -- into what weight to. Try to mitigate that risk somewhat is the focus on lower -- by and so. Well one of our favorite spartans so actually Irish -- Doug -- Cox stock which. -- Tyrod title sure has all of a sudden now all the stuff and it took sixteen point 8% year to date and it's being indexed by Newt be percentage points. But does DNC's so devoted -- stocks expense ratios points or eight happily. You have the. And a lot of our -- come well about half on Federalist they just come from the Big Three. Fidelity vanguard T wrote to you apprised. And their expense ratio is going to be below average we do have some. Higher expense ratio -- we do pay attention I mean we're not gonna have -- Metafile bit expense ratio. The 2% I think the highest expense ratio very -- we recommend. Is about one point 4% of that abuse small cap stock but we're expected you can run a little bit higher. Yep they do maybe we ought to run -- give me the hook but thank you for joining missing great article and appreciate what. My pleasure very tough if that's many -- -- get the article at Kipling a magazine or Keppinger dot com that's -- we got it. Many just nice job on his research and helps a lot of people out with his the researching does. Up next we're gonna revisit. A Waltham company called 123 news again and up to three that's next on the financial exchange.