Stock Market is the bottom in?

[OakSeeds]

I'd rather have my money in the broad market than any high flyer. Today's darling is tomorrow's dog.

Fidelity® Blue Chip Growth Fund	62.23%	29.82%	24.77%	19.43%	13.23%

The last reported figure - 13.23% - is the total annualized return since the inception of the fund in 1987 ..... 33 years ago!

"It is just one more example of how the S&P 500 Index continues to be held up as the standard by which all investment performances are measured. Investment managers are paid a lot of money to generate returns for their portfolios that beat the S&P 500, yet, on average, less than half do so. This is the reason why an increasing number of investors are turning to index funds and (ETFs) that simply try to match the performance of this index."

Source for Trump reference..... https://www.investopedia.com/articl...16/put-10000-sp-500-etf-and-wait-20-years.asp
"If Trump had done so back in 1987 (33 years ago), he would have earned 1,339% on his money for an average annualized return of 9.7%. But hindsight is 20/20, and he could not have known that."


Jack,
As much as you may wish to retain the belief that an actively managed fund cannot outperform a broad-based index fund (like the S&P) .... over an extended period of time, it does happen. The 2 quotes I pulled off the net clearly substantiate that the Fidelity BCG Fund substantially out performed the S&P by 3.53% annually over 33 years, or - said differently a 36.4% advantage/yr. You are correct about one thing ... the BCG Funds are high flyers; albeit great performers for an incredibly long number of years. I posted the info on these funds in the hopes it might help younger persons/others with less experience in the market.

Here's the whole Trump piece; You might find it interesting.​

"Soon after Donald Trump entered the race for the Republican nomination for president, the press zeroed in on his net worth, which he claimed to be $10 billion. Financial experts have pegged his net worth at a more modest $4 billion. One of the cornerstones of Trump's campaign had been his success as a business person and his ability to create such wealth. However, financial experts have pointed out that if Trump had liquidated his real estate holdings, estimated to be worth $500 million, back in 1987, and invested them in the S&P 500 Index, his net worth could be as much as $13 billion.It is just one more example of how the S&P 500 Index continues to be held up as the standard by which all investment performances are measured. Investment managers are paid a lot of money to generate returns for their portfolios that beat the S&P 500, yet, on average, less than half do so. This is the reason why an increasing number of investors are turning to index funds and (ETFs) that simply try to match the performance of this index.​

"If Trump had done so back in 1987, he would have earned 1,339% on his money for an average annualized return of 9.7%. But hindsight is 20/20, and he could not have known that."

 

[yoderjac]

Fidelity® Blue Chip Growth Fund	62.23%	29.82%	24.77%	19.43%	13.23%

The last reported figure - 13.23% - is the total annualized return since the inception of the fund in 1987 ..... 33 years ago!

"It is just one more example of how the S&P 500 Index continues to be held up as the standard by which all investment performances are measured. Investment managers are paid a lot of money to generate returns for their portfolios that beat the S&P 500, yet, on average, less than half do so. This is the reason why an increasing number of investors are turning to index funds and (ETFs) that simply try to match the performance of this index."

Source for Trump reference..... https://www.investopedia.com/articl...16/put-10000-sp-500-etf-and-wait-20-years.asp
"If Trump had done so back in 1987 (33 years ago), he would have earned 1,339% on his money for an average annualized return of 9.7%. But hindsight is 20/20, and he could not have known that."


Jack,
As much as you may wish to retain the belief that an actively managed fund cannot outperform a broad-based index fund (like the S&P) .... over an extended period of time, it does happen. The 2 quotes I pulled off the net clearly substantiate that the Fidelity BCG Fund substantially out performed the S&P by 3.53% annually over 33 years, or - said differently a 36.4% advantage/yr. You are correct about one thing ... the BCG Funds are high flyers; albeit great performers for an incredibly long number of years. I posted the info on these funds in the hopes it might help younger persons/others with less experience in the market.

Here's the whole Trump piece; You might find it interesting.​

"Soon after Donald Trump entered the race for the Republican nomination for president, the press zeroed in on his net worth, which he claimed to be $10 billion. Financial experts have pegged his net worth at a more modest $4 billion. One of the cornerstones of Trump's campaign had been his success as a business person and his ability to create such wealth. However, financial experts have pointed out that if Trump had liquidated his real estate holdings, estimated to be worth $500 million, back in 1987, and invested them in the S&P 500 Index, his net worth could be as much as $13 billion.It is just one more example of how the S&P 500 Index continues to be held up as the standard by which all investment performances are measured. Investment managers are paid a lot of money to generate returns for their portfolios that beat the S&P 500, yet, on average, less than half do so. This is the reason why an increasing number of investors are turning to index funds and (ETFs) that simply try to match the performance of this index.​

"If Trump had done so back in 1987, he would have earned 1,339% on his money for an average annualized return of 9.7%. But hindsight is 20/20, and he could not have known that."

Completely agree. For every managed fund manger that has outperformed the S&P over long periods, there are many more who have underperformed it. So, my point hold that statistically, actively managed funds are not outperforming the broad market. I love broad market ETFs. Funds that are designed to follow the broad market are a great option. It is probably even reasonable to expect some market sectors to outperform others for significant periods. My point is that the narrower you focus, down to individual stocks, or narrow window market timing, the less long-term predictable success we see. My point was the value of investing in the broad market verses the stock picking approach.

Thanks,

Jack

 

[TreeDaddy]

Bogle on Mutual Funds

Check this book out

Read it 30 years ago. Its timeless. Just as applicable today as then

This stuff is not that hard

bill

 

[Chainsaw]

In 1987 the common belief was that raw land was a poor investment compared to the stock market. Using Trumps example if he had bought good Agricultural land here in Northern New York for the then going price of $350 an acre with his 500 million he would have been able to buy 1,428,571 acres if his buying didn't cause a price rise. Today land like that has sold for $8,000 and up an acre without realtors. Assuming taxes and insurance would have been paid by rent and or timber sales his 500 million would have grown to $8,000 x 1,428,571 acres =$11,428,568,000. That would not have been as good as Fidelity Blue Chip but Trump could have grown a lot of apples and had some awesome hunting as well. And still enjoyed a heck of a profit.

If He had bought low end AG properties at an average of $126 per acre he wouldn't have made out as well on land appreciation as that only sells for $800 to $1200 per acre pre-covid, still not so bad assuming timber sales would have covered taxes and insurance (more timber on hunting land than AG land). Note-I don't know what affect Covid has had on land value as I don't hear about what is happening this minute.

Since there are now more people per acre going into the next 35 years the case can be made that land could see greater demand growth than it did in the last 35 years. I am glad my wife and I bought land with our little nest egg between 1987 and 1995. Still, I'm no investment expert so before anyone buys land partially or fully as an investment, check my math. I checked my math against the computer and got the same result but I'm no math expert either and could be way off.

 

[chummer]

In 1987 the common belief was that raw land was a poor investment compared to the stock market. Using Trumps example if he had bought good Agricultural land here in Northern New York for the then going price of $350 an acre with his 500 million he would have been able to buy 1,428,571 acres if his buying didn't cause a price rise. Today land like that has sold for $8,000 and up an acre without realtors. Assuming taxes and insurance would have been paid by rent and or timber sales his 500 million would have grown to $8,000 x 1,428,571 acres =$11,428,568,000. That would not have been as good as Fidelity Blue Chip but Trump could have grown a lot of apples and had some awesome hunting as well. And still enjoyed a heck of a profit.

If He had bought low end AG properties at an average of $126 per acre he wouldn't have made out as well on land appreciation as that only sells for $800 to $1200 per acre pre-covid, still not so bad assuming timber sales would have covered taxes and insurance (more timber on hunting land than AG land). Note-I don't know what affect Covid has had on land value as I don't hear about what is happening this minute.

Since there are now more people per acre going into the next 35 years the case can be made that land could see greater demand growth than it did in the last 35 years. I am glad my wife and I bought land with our little nest egg between 1987 and 1995. Still, I'm no investment expert so before anyone buys land partially or fully as an investment, check my math. I checked my math against the computer and got the same result but I'm no math expert either and could be way off.

Land prices have gone up since COVID. My third go around for closing is in the next couple of weeks. First two backed out at closing. The real estate company says there is a huge shortage for recreational properties. They have a line of buyers. After the first two backed out they had new buyers each time in a couple of weeks. First buyer was from PA, second was from Texas, third is from Buffalo.

 

[SD51555]

In 1987 the common belief was that raw land was a poor investment compared to the stock market. Using Trumps example if he had bought good Agricultural land here in Northern New York for the then going price of $350 an acre with his 500 million he would have been able to buy 1,428,571 acres if his buying didn't cause a price rise. Today land like that has sold for $8,000 and up an acre without realtors. Assuming taxes and insurance would have been paid by rent and or timber sales his 500 million would have grown to $8,000 x 1,428,571 acres =$11,428,568,000. That would not have been as good as Fidelity Blue Chip but Trump could have grown a lot of apples and had some awesome hunting as well. And still enjoyed a heck of a profit.

If He had bought low end AG properties at an average of $126 per acre he wouldn't have made out as well on land appreciation as that only sells for $800 to $1200 per acre pre-covid, still not so bad assuming timber sales would have covered taxes and insurance (more timber on hunting land than AG land). Note-I don't know what affect Covid has had on land value as I don't hear about what is happening this minute.

Since there are now more people per acre going into the next 35 years the case can be made that land could see greater demand growth than it did in the last 35 years. I am glad my wife and I bought land with our little nest egg between 1987 and 1995. Still, I'm no investment expert so before anyone buys land partially or fully as an investment, check my math. I checked my math against the computer and got the same result but I'm no math expert either and could be way off.

I'm not so sure. We've been in a constant state of stimulus since 1985. It's very easy to see in hindsight why prices have soared. We've been minting new millionaires every time the fed waves their wand and lowers interest rates. To think the trend would continue, the method that got us there must also continue. But we're out of room. There's only about one good bailout interest rate reduction left before interest rates go to zero. Once we get there, where's the next source of stimulus to drive prices higher?

This is the 10-year treasury back to 1985. The trajectory of this line says we'll cash in our last get out of jail free card (abrupt rate cut) by the middle of 2022. After that, the only place left to go is direct subsidy to buy things. I've said, I'll buy a house when somebody pays me to do so. That day is getting close.



Think I'm crazy...? This isn't even a fart in the wind either. This should more likely be $50,000-$100,000 if they are serious about raising the cost of housing.

Biden looks to give a big boost to homebuyers and builders

President-elect Joe Biden's housing agenda is focused on affordability. Changes to mortgage lending and home construction will be key.

www.cnbc.com

 

[SD51555]

Land prices have gone up since COVID. My third go around for closing is in the next couple of weeks. First two backed out at closing. The real estate company says there is a huge shortage for recreational properties. They have a line of buyers. After the first two backed out they had new buyers each time in a couple of weeks. First buyer was from PA, second was from Texas, third is from Buffalo.

Have you heard why they're backing out?

 

[SD51555]

There is a difference between a company that pays no dividend and one that has no profits or free cash flow. I would much prefer a company to do a stock buy back rather than a dividend if they feel they can't use the profits to grow and generate more profit. Outside retirement containers, I control when pay capital gains tax. The company controls when I pay tax on dividends.

There's merit in that, I do agree. Now is a hard environment for buybacks though. In reality, companies should be issuing stock as fast as they can right now, and many are. Those that are though, are most likely total crap. But if the people want crap, write c-r-a-p on a sheet of paper and call it an IPO.

 

[chummer]

Have you heard why they're backing out?

First guy (PA)agreed to buy in March and wanted to build for this snow mobile seasons. Because of COVID the lawyers couldn’t get their crap together and we couldn’t get a close date until August. My guess is he figured he couldn’t get anything built in that time frame so he bailed. Second guy (TX) was moving there because his wife’s family was 40 minutes away. He just retired from military and got cold feet on the move. He blamed it on Trump loosing and thinks the economy will crash. They both donated their 1k deposits.

 

[Chainsaw]

SD51555, you brought up an excellent point about the dropping interest rates; Low and lower interest rates surely helped fuel the land buying as well as stock buying and house buying. And higher rates and /or that there is not much room to continue lowering interest rates will have new impacts on all investment demand. There is a lot to this equation and the outcome is not a sure thing in any investment avenue one chooses even though historically over time the stock market and land values have continued to rise at least where I see it.

 

[SD51555]

First guy (PA)agreed to buy in March and wanted to build for this snow mobile seasons. Because of COVID the lawyers couldn’t get their crap together and we couldn’t get a close date until August. My guess is he figured he couldn’t get anything built in that time frame so he bailed. Second guy (TX) was moving there because his wife’s family was 40 minutes away. He just retired from military and got cold feet on the move. He blamed it on Trump loosing and thinks the economy will crash. They both donated their 1k deposits.

Man, you may have a real racket going there. Lower the price a little and counter for higher ernest money. You could be pulling down lease level income and still get to hunt it.

 

[chummer]

Man, you may have a real racket going there. Lower the price a little and counter for higher ernest money. You could be pulling down lease level income and still get to hunt it.

If this guy backs out I will be up 3k for the year while the value goes up. I do have an opportunity cost. This money is going in the market, so I am probably down more than the 2k I got if the first deal would have went through in August.

 

[Bowsnbucks]

The last reported figure - 13.23% - is the total annualized return since the inception of the fund in 1987 ..... 33 years ago!

"It is just one more example of how the S&P 500 Index continues to be held up as the standard by which all investment performances are measured. Investment managers are paid a lot of money to generate returns for their portfolios that beat the S&P 500, yet, on average, less than half do so. This is the reason why an increasing number of investors are turning to index funds and (ETFs) that simply try to match the performance of this index."

Source for Trump reference..... https://www.investopedia.com/articl...16/put-10000-sp-500-etf-and-wait-20-years.asp
"If Trump had done so back in 1987 (33 years ago), he would have earned 1,339% on his money for an average annualized return of 9.7%. But hindsight is 20/20, and he could not have known that."


Jack,
As much as you may wish to retain the belief that an actively managed fund cannot outperform a broad-based index fund (like the S&P) .... over an extended period of time, it does happen. The 2 quotes I pulled off the net clearly substantiate that the Fidelity BCG Fund substantially out performed the S&P by 3.53% annually over 33 years, or - said differently a 36.4% advantage/yr. You are correct about one thing ... the BCG Funds are high flyers; albeit great performers for an incredibly long number of years. I posted the info on these funds in the hopes it might help younger persons/others with less experience in the market.

I've been studying and following investments since 1978. One thing I've seen is that high-flyers have their days in the sun, but their can also be a lot of gray skies. To focus solely on high growth funds, you're limiting your exposure to other sectors in the market ............. that ALSO have their days in the sun. Statistically, there are more fund managers that FAIL to match - or beat - their benchmark indices than their are those who BEAT them. (Jack touched on this point in an earlier post). And you pay more to the active managers to get those sub-par results. I know - I owned some at one point. I'd have several great years .......... and then several toilet years where the great years' gains were all lost. Averaged out - I'd have been further ahead to park in the LOW-COST index funds and at least match the markets' gains over the long haul. I still have money in 2 actively managed funds that I've held for over 35 years, and one typically beats the benchmark by a few points - the other is a coin flip in any given year. That latter one has "sunny days" and also a few "gray skies" - times where it lags the benchmark by a few points.

For long-term, LOW-COST investing, it's tough to beat index funds - where you're exposed to various sectors and have better diversification. My own choice would be to have the bulk of my money in low-cost index funds, and have maybe 10% - 15% in a fund like Fidelity Blue Chip Growth or T. Rowe Price Blue Chip growth. How you spread your investments also has a lot to do with your age and time horizon until you reach retirement age. The younger one is, and the longer you have to accumulate wealth - the more aggressive one can afford to be.

 

[OakSeeds]

I'll play the Devil's advocate and defend the BCG over the S&P Index Fund as a better investment all day long; let's let everyone understand terms and best funds (including composition); then we'll compare some performance data and a simple way to ensure your success. The https://www.investopedia.com/articles/markets/101415/4-best-sp-500-index-funds.asp ..... site purports to list the BEST S & P Index Funds and they note Fidelity (FXAIX) is the best low cost (.015 expense ratio) and a strong performer (31.47 return in 2019). I'll use 2 Fidelity Funds for all comparisons since the FAANG discussion started with Fidelity BCG as an example; we'll compare it's performance to FXAIX (Fidelity S&P Index Fund). The BCG Fund has a higher proportion of its holdings in large cap growth companies with a substantial portion of its top 10 holdings (44.5%) in tech stocks traded on the Nasdaq (2 of the 10 are traded on the Dow) and 4 of 6 leading stocks in the top 10 are FAANG Stocks.. The FXAIX Index has more diversity reflecting the composition of the various sectors comprising the market and - as a passively managed fund with relatively lower volitility - has a lower expense ratio (cost of ownership) than the BCG Fund. In contrast to the BCG Fund, only 27.34% of its holdings are in the top 10 stocks comprising the fund. Among the top 10 are 4 FAANG stocks (APPL/#1, AMZN/3, FB/4, GOOG/6). Tesla and Microsoft are the remaining 2 stocks in 6 most heavily weighted of the top 10. The BCG Fund contains the same 6 stocks (APPL, AMZN, MSFT, GOOGL, TSLA and FB) as the stocks most heavily weighted in the top 10 of the Index Fund. So FAANG stocks are a substantial portion of each fund, albeit a much greater presence in the BCG Fund.
If one reviews each fund with respect to the proportion of the fund represented by specific market sectors, you will find the funds each display the same market sectors as the top 4 represented in the fund. For the BCG Fund, Informatio0n Technology, Consumer Discretionary, Communication Services and Health Care collectively comprise about 90% of the portfilio. The FXAIX Index Fund leading sectors are Information Technology, Health Care, Consumer Discretionary and Communication Services ... the same top 4 sectors as the BCG Fund; however, only these 4 sectors comprise only about 65.5% of the stocks in the fund. Both funds are approximately 33 years old; BCG Fund inception was 12-1987 while FXAIX Index Fund inception was 2-1988.
The performance of the 2 funds varies considerably over the 33 year history; the BCG Fund achieved an average annual return of 13.23% while the FXAIX Index fund achieved an average annual return of 9.7%. In a retirement account, with growth over relatively long time periods, this 3.5% annual average difference over 33 years could easily compound to the BCG Fund becoming 2 -3 times as large as the FXAIX Index Fund value. Let's consider an example with a shorter time frame taken directly from the Fidelity web pages describing the performance of these 2 funds.
$10,000 dollars invested in the BCG Fund on January 1, 2011 would be worth $55,000 at the end of 2020 (actually an update says over 58,000 as of February 2021). The average annual return over the last 10 years for the BCG Fund is 19.32% and the YTD 2-6-2021 return is 8.84%. In contrast, $10,000 invested in the FXAIX Index Fund would be worth $35,000 over the same 10-year period with an average annual return of 13.49% and the 2021 YTD return of 3.62%. The $20,000 difference in performance over the past 10 years means the BCG Fund performed 57+% better then the Fidelity Index Fund over the same time period. Since BOTH funds have considerable exposure to FAANG stocks - clearly the BCG have a much higher proportion in FAANG stocks (about 17% more) - neither fund escapes unscathed if - as some lament - the FAANG stocks get hammered.
It's late and I'm tired and this is getting long ... will provide short finish in a day or so.

 

[OakSeeds]

Let the good times roll .... https://www.cnn.com/2021/02/05/investing/dow-stock-market-today-jobs-report/index.html

"Strong fourth quarter earnings have also helped boost investor sentiment. Ford (F), biotech company Gilead Sciences (GILD), social media firms Pinterest (PINS) and Snap (SNAP) and video game maker Activision Blizzard (ATVI) all rose following solid results.
In fact, profits for S&P 500 firms are now up about 1.7% for the fourth quarter compared to a year ago, according to data from FactSet. It's the first time that earnings have risen since the fourth quarter of 2019.
Big tech firms -- the market's beloved FAANG stocks as well as Microsoft (MSFT) and Tesla (TSLA) -- have all posted healthy sales and profits as well. That's led some experts to believe that growth stocks can continue to lead the market higher.
"Earnings have been good and the numbers from Apple and Microsoft have been stunning," said Mark Stoeckle, CEO and senior portfolio manager of Adams Funds.
It should only get better. FactSet said that analysts are now forecasting that earnings for S&P 500 companies will jump 21% from a year ago in the first quarter and soar nearly 50% in the second quarter."

 

[bwoods11]

I get a kick out of articles challenging the wealth of Donald Trump. First off, he wanted to grow his wealth in real estate, not stocks, he accomplishes his goal and then some. He has great buildings, golf courses, hotels, prime beachfront.

He also became the first US billionaire and President ever.

Jealousy issue, and the people challenging his wealth have no idea how he used leverage/debt to acquire all the income producing assets.

Sure wish he was here for another 4 years. I have zero confidence in the new guy.

 

[Bowsnbucks]

Chainsaw, post #674 -
There's no doubt that Fidelity BCG and T. Rowe Price BCG have performed well. I won't argue that at all. My point was, for most people - and the BULK of their money - a broader S & P 500 index fund, or total stock market index fund, gets them more diversification instead of the more concentrated FAANG stock-heavy BCG funds. I'm all for having some money in either of those BCG funds - but I wouldn't want the BULK of my money in them. There are times when smaller company stocks and value stocks dominate - and big stocks fall from favor. I'd rather own the whole market to cover my butt than be caught off guard when the big names fall out of favor. (I'm basing my opinion on historical evidence from the last 40 years)

I have a couple personal friends who were bitching about their investment returns over the last 5 to 7 years. They told me what their returns were, and I told them what my wife's and my returns have been. One guy in particular disputed our returns, saying, "There's NO WAY you could have gotten those kinds of returns. If those kinds of gains were possible, my advisor would have had me in those investments!! " I calmly told him that yes, we had those types of gains, and that I'd e-mail him copies of charts from an investment magazine to prove what I said. I reminded him that some advisors have an interest in promoting certain investments because the advisors get commissions from getting clients into them. Where my wife and I have most of our money, NO ADVISOR, no commissions, no 12b-1 fees, no sales loads, etc. - and super-low costs to own. We don't "top the charts" in most years ............... but we're not in the lower half of those charts either in bad times. Less choppy water. The younger one is, the more you can afford to get more aggressive with your investments. If I were 20 years old again, I'd be putting a larger percentage of my money into a BCG fund, and probably into a small company stock fund. (Of course that's easily said with the benefit of hindsight!!)

Tree Daddy mentioned the book "Bogle on Mutual Funds" in post #663 above. Great book. I have ALL of Bogle's books. I've also read some articles by Burton Malkiel, Buffet, and Ben Graham - all proponents of real, intrinsic value data of companies and mutual funds, as well as the COSTS to invest.

I have NO affiliation with any mutual fund company or brokerage. I'm in a technical field of big construction.

Each move we make when investing carries some measure of risk. I just like to mitigate the downslopes by more diversity. At my age, I love smoother sailing!! YMMV.

 

[Buckly]

I get a kick out of articles challenging the wealth of Donald Trump. First off, he wanted to grow his wealth in real estate, not stocks, he accomplishes his goal and then some. He has great buildings, golf courses, hotels, prime beachfront.

He also became the first US billionaire and President ever.

Jealousy issue, and the people challenging his wealth have no idea how he used leverage/debt to acquire all the income producing assets.

Sure wish he was here for another 4 years. I have zero confidence in the new guy.

The media was attacking every aspect of the man. I don’t know personally but, my guess is that it doesn’t really make much of a difference if your worth 5 billion or 13 billion anyway . I think you kind of live the same lifestyle. It’s not like you‘re all of a sudden eating fast food instead of having personal chefs. LOL.

 

[chummer]

The media was attacking every aspect of the man. I don’t know personally but, my guess is that it doesn’t really make much of a difference if your worth 5 billion or 13 billion anyway . I think you kind of live the same lifestyle. It’s not like you‘re all of a sudden eating fast food instead of having personal chefs. LOL.

The beauty of Trump is he prefers fast food over personal chefs.

 

[SwampCat]

Just think if Trump had liquidated all his business holdings back then and bought ammo.