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Interesting example of actively managed dividend mutual funds beating ETFs over the 10 year period

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  • Oct 4th, 2017 11:11 am
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[quote="porticoman"

is Warren Buffett really that good?[/quote]

That good you mean having some performance as index on 10 years +- or trailing it on 15 or 3?

I hope they do include dividends in S&P return...
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asa1973 wrote:
That good you mean having some performance as index on 10 years +- or trailing it on 15 or 3?

I hope they do include dividends in S&P return...
SPY 1.91% dividend sucks eh!,its just the growth that matters which I believe beats BRK.B

http://www.nasdaq.com/symbol/spy

http://www.nasdaq.com/symbol/brk-b

So, is it a direct investment in the S&P (SPY), BRK.B, QQQ or a total market ETF from Vanguard, Blackrock, Invesco, BMO, TD, RY, Proshares, Horizon et.al?

My guess is ETF or Mutual fund managers are basically all doing the same job, investing in the same companies/commodities ... the question is 'how do they differ from each other'?
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Congratulations [OP] on creating an active thread with lots of interest.

I think that the screen of "in the first quartile for the 12-month and 10-year periods to Aug. 31" ( see post #1) left out a lot of equal, if not better, fund performances.

Here's a snap shot of Mawer fund performances. PH&N has some good ones too.
It must be remembered that in a 2008-style fiasco, pure equity funds can be expected to drop 30 to 40%

Image
Source: http://www.mawer.com/our-funds/snapshot/
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porticoman wrote: SPY 1.91% dividend sucks eh!,its just the growth that matters which I believe beats BRK.B

http://www.nasdaq.com/symbol/spy

http://www.nasdaq.com/symbol/brk-b

So, is it a direct investment in the S&P (SPY), BRK.B, QQQ or a total market ETF from Vanguard, Blackrock, Invesco, BMO, TD, RY, Proshares, Horizon et.al?

My guess is ETF or Mutual fund managers are basically all doing the same job, investing in the same companies/commodities ... the question is 'how do they differ from each other'?
Well, there is only a limited number of companies/commodities out there so you are right to a certain extent. However, you completely ignore the following if you limit yourself to that kind of thinking:

1. When did they buy the shares? How much did they buy them at?
2. How many did they buy?
3. What's the portion of the fund that those share represent?
4. When did they sell? How much did they sell them at?
5. How many did they sell the shares?
.... the list of combinations is endless so they can own the same companies at any given time but would have vastly different results.
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IrwinW wrote: Congratulations [OP] on creating an active thread with lots of interest.

I think that the screen of "in the first quartile for the 12-month and 10-year periods to Aug. 31" ( see post #1) left out a lot of equal, if not better, fund performances.

Here's a snap shot of Mawer fund performances. PH&N has some good ones too.
It must be remembered that in a 2008-style fiasco, pure equity funds can be expected to drop 30 to 40%

Image
Source: http://www.mawer.com/our-funds/snapshot/
Remember that the initial screen was ONLY funds classified as Dividend and Income funds. The funds you listed are NOT classified as Dividend and Income funds so it had nothing to do with the time frame in question or whether or not they had 1st quartile performance.
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That's like saying, "I only want funds with mediocre performance" - isn't it?
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craftsman wrote: Well, there is only a limited number of companies/commodities out there so you are right to a certain extent. However, you completely ignore the following if you limit yourself to that kind of thinking:

1. When did they buy the shares? How much did they buy them at?
2. How many did they buy?
3. What's the portion of the fund that those share represent?
4. When did they sell? How much did they sell them at?
5. How many did they sell the shares?
.... the list of combinations is endless so they can own the same companies at any given time but would have vastly different results.

Agree.

your point #5, its no different than any the fund manager (turnover/rebalancing the inventory) in any of the ETF or Mutual fund companies.

Any fund manager that sticks with a set of the same equities in the same fund is not going to do well, so they do their job, look at what other funds have in their portfolio holdings, look at the performance of others, likely follow each other to keep on rebalancing/turnover the holdings - 'rinse & repeat'.

Its just a different dog chasing the same tail.

As I posted, is it invest in one of the hundreds of ETF funds available or just one of the MAW series, Vanguard series (both favourites of RFD) or the S&P?

This is not rocket science, when past performance is only a guide

So many variables

From the Morningstar website, I compared MAW104, MAW105, MAW106, MAW 150. Looked at performance, TTM yield, and turnover.

Turnover is important as is the performance & yield.

Fund managers are not the brightest people IMO

Start with MAW150

http://quote.morningstar.ca/quicktakes/ ... ture=en-ca
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porticoman wrote: Agree.

your point #5, its no different than any the fund manager (turnover/rebalancing the inventory) in any of the ETF or Mutual fund companies.
Not really. Some may decided sell a position short in that case, they would have sold more stock than they had in inventory OR they might have decided to overweight the position so that they owned more than what they would normally own. In using most ETFs, neither of the two processes are possible.
porticoman wrote: Any fund manager that sticks with a set of the same equities in the same fund is not going to do well, so they do their job, look at what other funds have in their portfolio holdings, look at the performance of others, likely follow each other to keep on rebalancing/turnover the holdings - 'rinse & repeat'.
There seems to be some miscommunications here. Having the same equities in the same fund does NOT mean it's not going to do well... it's the portion of those equities and their individual performances that make the difference. For example, if you take a fund with 100 different equities with 50 of those equities performing well and 50 of them performing poorly, you'll get an average result IF, and only IF, the proportions of those equities in the fund are equal (and no additional sales or purchases happen during the period in question). If the funds have a larger allotment towards the strong performers (ie still has the 50 equities but more than 1/2 the money in the fund invested in the strong performers), then the fund will outperform the average result. The flip side is also true that if the fund has more than 1/2 of the money in the poor performing ones, then the fund will perform poorly.
porticoman wrote:
As I posted, is it invest in one of the hundreds of ETF funds available or just one of the MAW series, Vanguard series (both favourites of RFD) or the S&P?
Diversification is a good thing in order to reduce risk (however, it tends to reduce returns as well). Over diversification is a bad thing as you basically end up with buying the market but with more complications.

porticoman wrote: Turnover is important as is the performance & yield.
Turnover is NOT really as important as performance and yield. Turnover just measures how many times the positions are sold off and purchased in the fund over a given period of time. While high turnover will contribute to a higher MER, turnover itself is not a bad thing especially if it's in the funds mandate - ie. a fund that holds stocks of companies in the middle of a take over battle. It might be a bad thing however IF the turnover is in the opposite view of the fund's mandate (ie. mandate says that they are looking for long term value plays and employs and buy and hold strategy but the turnover rate is high...).
porticoman wrote: Fund managers are not the brightest people IMO
They don't have to be... they just need to be brighter than the average investor.
That I disagree. MAW150 is a good fund BUT it's a specialized fund in that it looks at global small caps so for the average investor, it's not a good fund to base a portfolio unless you can weather the higher risk in being a smaller cap fund.
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craftsman wrote:
that I disagree. MAW150 is a good fund BUT it's a specialized fund in that it looks at global small caps so for the average investor, it's not a good fund to base a portfolio unless you can weather the higher risk in being a smaller cap fund.
As an investor looking at mutual funds I would research the best return over the long haul, 10 years minimum

Looking through globefund website, filtering for 5 star ratings & performance/return, CIBC is doing a great job out performing the TD e-series, the Mawer funds & other.

http://globefunddb.theglobeandmail.com/ ... anager_id=

With $10k investment in 'CIBC Global Technology A' over a 10 year period that investment is now worth $29,800

https://www.theglobeandmail.com/globe-i ... e_type=ROB

edit to add thanks to irwinw

PH&N

https://www.theglobeandmail.com/globe-i ... e_type=ROB
Last edited by Guest37273939 on Oct 2nd, 2017 8:55 am, edited 1 time in total.
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porticoman wrote: As an investor looking at mutual funds I would research the best return over the long haul, 10 years minimum

Looking through globefund website, filtering for 5 star ratings & performance/return, CIBC is doing a great job, out performing the TD e-series, the Mawer funds & other.

http://globefunddb.theglobeandmail.com/ ... anager_id=

With $10k investment in 'CIBC Global Technology A' over a 10 year period that investment is now worth $29,800

https://www.theglobeandmail.com/globe-i ... e_type=ROB
Crappy fund with crappy performance.
Strange approach to compare index fund (eseries) with sector fund on BULL mostly market.
If'd compare it with similar TD Science&Tech, TD beats it in 2x magnitutde - 16% 10Y over 10% for CIBC, 59k 10y growth over 30k etc
http://quote.morningstar.ca/QuickTakes/ ... ture=en-CA
:)
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MTLGuru wrote: We're comparing this to XDV, created in 2005. How's that cherry picking for you?
Even XIU (SP/TSX60) and XIC (SP/TSX composite) -- probably the 2 most known Canadian indexes, are less than 20 years old. Please do enlighten us as to how we can do such a comparison.
The TSE / TSX Composite Index (or previously the TSE 300) index has been around for far more than just 20 years. There's not a lot of good data on the Internet, but the TSE performed very well in the 60s and 70s, compared to the US markets. And underperformed in the 80s, and 90s because of the implosion of the resources bubble that culminated with a blow-off-top in the early 1980s.
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Jungle wrote: Not sure the conclusion or point of this thread but maybe I'll try and sum it up:

If 91% of Canadian Equity funds underperformed the market over last 10 years , can we find the 9% of funds that wont in the future?

This is why a low cost balanced portfolio of etf is better than choosing select actively managed mutual funds.
One thing that is never mentioned in any ETF marketing material - > An ETF based on the market is GUARANTEED to under perform the market due to the fact that it can NEVER match the market even if you don't factor in the MER.

Why? Because ETFs will trail the market - if it holds stocks then it will trade those stocks when conditions allow it do and not necessarily the best or optimum times. A good example is when a stock is removed from the index. An large ETF can't sell all of the stock immediately when the stock is removed from the index so it must sell into the market is small amounts. If the ETF sells all of stock at once, the price of the stock will be depressed due to the glut of stock. The same goes in reverse when a stock is added to the index. The ETF has to buy in small amounts overtime to get a decent price. If they purchased it all at once, the price of the stock will be driven up due to the high demand.

At least with mutual funds, even with those statistics, the average investor who just buys without any research has a 1 in 10 chance of over performing the market... seems to be better odds than to come out ahead than a guarantee to under perform the market.

BTW> If that's the summary that you have come up with from this thread, I would suggest that you re-read the thread and the G&M article with an open mind. And maybe recheck your priorities in selecting investment vehicles from keeping cost low to improving returns.
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Jungle wrote: Not sure the conclusion or point of this thread but maybe I'll try and sum it up:

If 91% of Canadian Equity funds underperformed the market over last 10 years , can we find the 9% of funds that wont in the future?

This is why a low cost balanced portfolio of etf is better than choosing select actively managed mutual funds.
That's why I choose broad diversification when it is available at reasonable cost. Others may enjoy researching markets in detail and predicting outcomes, but not me.

Are you familiar with Norm Rothery's Stingy Investor Asset Mixer? It has TSX data from 1957 and S&P500 from 1970. It's a cool tool for comparing past returns and volatility (in CAD or USD).
http://www.stingyinvestor.com/cgi-bin/downside_adv.cgi
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Jungle wrote: Not sure the conclusion or point of this thread but maybe I'll try and sum it up:

If 91% of Canadian Equity funds underperformed the market over last 10 years , can we find the 9% of funds that wont in the future?

This is why a low cost balanced portfolio of etf is better than choosing select actively managed mutual funds.
Agreed, however, It is not clear which class of funds were compared. SPIVA's research seem to have omitted lower fee mutual funds ( example can include TD's e-class, RBC's d-class funds, BMO's funds/etfs that can be bought on self directed accounts). RBC's own d-class funds have about a 1.0% lower fee than their regular/retail/in branch a-class funds. BMO's self directed funds have up to 2,0% lower fees than their equivalent retail counterpart.

One way to compare the fund you own or interested in would be to use Morningstar's screening tool. You will be able to compare your fund performance versus the benchmark and the average of the category.

Craftman's post give some interesting funds that have beaten the index. Furthermore, EVERY index etf will underperform the index, guaranteed.
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burnt69 wrote: The TSE / TSX Composite Index (or previously the TSE 300) index has been around for far more than just 20 years. There's not a lot of good data on the Internet, but the TSE performed very well in the 60s and 70s, compared to the US markets.
Not a lot, but at least some data for the TSE, from a newspaper article in 1983 by Seymour Friedland, professor of finance at York University, Toronto.

Last year (1982) the TSE 300 averaged 2366.8, up 95% from a decade earlier and 3.5 times the 1963 average. 6.9% compound growth in stock prices over the last decade.

Real returns (after inflation):

The 1983 average level of the TSE 300 becomes 816, down from 1059 in 1973 and 901 in 1963.

Dividends are not included in the above figures.

During the last 20 years you would have had an annual compound growth rate of 6.5% in stocks, but investing in inflation paid better - about 6.8% a year.
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Stryker wrote: Not a lot, but at least some data for the TSE, from a newspaper article in 1983 by Seymour Friedland, professor of finance at York University, Toronto.

Last year (1982) the TSE 300 averaged 2366.8, up 95% from a decade earlier and 3.5 times the 1963 average. 6.9% compound growth in stock prices over the last decade.

Real returns (after inflation):

The 1983 average level of the TSE 300 becomes 816, down from 1059 in 1973 and 901 in 1963.

Dividends are not included in the above figures.

During the last 20 years you would have had an annual compound growth rate of 6.5% in stocks, but investing in inflation paid better - about 6.8% a year.
Which makes all calculations quite useless...~50% of returns came from dividends, especially for TSX having them much more than S&P. Not including them in returns calculation just have no sense...except someone did that intentionally to "prove" his point...
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