Quote:
Originally Posted by lewdog
Most studies today lean heavily against this idea, as you know. The common man simply doesn't have the discipline, knowledge and in many cases time to fully manage investing in individual companies and beat mutual/index funds across time.
Care to share your individual returns on your investments as a whole? Are your employee sponsored retirement plans behind your gains you've made in the market yourself?
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First off, I'm not sure how these brokerages calculate returns, and I don't really trust how they do it. In my case, I'm particularly unsure how they're counting dividend reinvestment. They classify my returns on individual stocks as if I'm contributing the money from dividend reinvestment, when I'm not. Those are actually returns, not costs. And I think they don't count imbedded fees in mutual funds, which overstates those returns. But I'll just report what they say.
Here's an example in one of my accounts. I decided in that account long ago that I would do what I'm told and go with mutual funds. I did it all the way you were supposed to - I picked a small set of diverse funds, all highly rated, and ... bleah. I was constantly trailing the market. So about three years ago I started chucking the mutual funds out the door and buying my own stocks. Here are my annual returns versus the S&P 500.
5-year return: Underperformed by 3.23% per year (mutual funds suck)
3-year return: Overperformed by 0.10%. As soon as I ditched the mutual funds I quickly caught up.
1-year return: Underperformed by 0.19%. Running about equal now but the S&P was up 23 percent so the difference is noise.
That account's not killing it, but look at the five-year return. My returns with mutual funds were pathetic, and as soon as I got out I started making up ground. Now I'm tracking the S&P's returns.
A second account is newer, so I've only got three years of data. I would expect this one to underperform a bit because I put in a large cash infusion to start it, and have bought very slowly. Three years later I'm still at over 20 percent cash. But here's where I'm at versus the S&P just to be consistent.
3-year return: Overperformed by 0.62% per year.
1-year return: Underperforming by 1.79%. Not having a great year this year, but that's cooked into the three year return above.
I'm winning that battle despite having a cash position that's averaged over 20%.
The third account will only give me calendar year comparisons for last year and this YTD.
2016: Overperformed by 3.82% (I killed the S&P)
2017: Underperforming by 1.96%. (I lost 1.4 percent against the S&P this month for some reason, which is most of that.)
I'm winning again.
Granted, this is just against the S&P. Nasdaq is smokin' this year, and I'm underrepresented in Nasdaq.
In the long run, I've got enough diversification that I'd rather buy stocks once for a $5 purchase fee, and then not pay fees every year so some mutual fund manager can go gambling (or charge me to rebalance an index fund). There's some rebalancing to be done occasionally and I like to play games by buying and selling, but the bottom line is that I used to hold mutual funds and I consistently underperformed the market by a fair margin. Now I hold stocks and I don't.