The Invisible Chasm

One difference between Morningstar’s results reporting (1-, 3, 5 and 10 year) and ours (up cycle, down cycle, full market cycles plus standard periods) is that theirs contains an invisible chasm. That chasm exists for funds that were around during the 2007-09 market crisis but that do not have a 10 year track record yet. The only thing that Morningstar will report is their records for the past five years or less. No matter how catastrophic their performance during the meltdown, they receive no penalty for it. Their 3- and 5-year return ratings cover only the recent bull market and their star ratings (and risk grades!) are based only on their performance in the good times.


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The Eternal Losers List

The current full market cycle began in October 2007 as domestic markets peaked just ahead of the worst financial meltdown since the Great Depression. Domestic markets hit bottom in early March, 2009, and have rebounded sharply since then.


Mostly. Vanguard’s Total Stock Market Index took 52 months to recover from the crisis; that is, it took 52 months to regain its October 2007 levels. The Total Stock Market gained 6.2% annually if you measure from October 2007 and 19.5% if you measure from March 2009. The relentless bull market that began in March 2009 has lifted all boats.


Almost all boats.


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The MFO Screener: Technology Funds

We were wondering whether there were any “safe” Technology Funds to consider for the potentially turbulent years ahead. We thought we’d start by asking “who did well during the last two crashes?” and seeing if anyone avoided the worst of the bloodshed in both 2000-02 and 2007-09.


To do that, using MultiSearch tool, we selected “Science & Technology” funds from the fund “Category” (upper left) then picked “Display period” to “Down Cycle 4: 2000-2002.” Click! (…on “Submit Search” button.) We sorted the resulting list to show the smallest Maximum Drawdown and, as a double-check, sorted again for the smallest Ulcer Index. The difference is that the Ulcer Index incorporates both the size of the Maximum Drawdown and the funds’ Recovery period.


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The MFO Screener: Learning By Doing

Our screener has two functions. The first is to allow side-by-side comparisons of a dozen or more funds over meaningful time periods. The second is to allow you to generate lists of funds whose accomplishments are particularly meaningful to you.


Here’s an example: you might want to discover which small-cap funds bounced back most quickly from the 2007-09 debacle. That would likely reflect funds that had modest drawdowns and strong rebounds.


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Becoming Surprisingly Successful: Notes To The Mutual Fund Community (Part One)

Fund managers are seen, dear friends, as “the walking dead.”


CBS News declared you “a losing bet.” declared that you’re dead. Joseph Duran asked, curiously, “are you a dinosaur?” Schwab declared that “a great question!” Ric Edelman, a major financial advisor, both widely quoted and widely respected, declares, “The retail mutual fund industry is a dinosaur and won’t exist in 10 or 15 more years, as investors are realizing the incredible opportunity to lower their cost, lower their risks and improve their disclosure through low-cost passive products.” When asked what their parents do for a living, your kids desperately wish they could say “my dad writes apps and mom’s a paid assassin.” Instead they mumble “stuff.” In short, you are no longer welcome at the cool kids’ table.


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