Sunday, May 12, 2013

Investing To Win

The Big Picture reminds us:

The Math of Active Management is Daunting:

1. Only 20% of active managers (1 in 5) can outperform their benchmarks in any given year;

2. Within that quintile, less than half (1 in 10) outperform in 2 out of the next 3 years;

3. Only 3% stayed in the top 20% over 5 years (1 in 33);

4. Once we include costs and fees, less than 1% (1 in 100) manage tooutperform (net).

5. What are the odds you can pick that 1 in 100 manager?

Source: Morningstar, Vanguard

The odds? Probably not good.

The TAG 401k) Plan has a wide array of index funds (also a number of actively managed funds, in case you want to hook your wagon to some out-performer's star. But remember ... today's hot financial adviser is tomorrow's loser.)

I remind people about index investing because I've gotten shafted investing with a smarter-than-thou financial adviser picking individual stocks. It's not that the adviser was super wrong, it's that the adviser charged Big Money to be only mildly right.

Months ago, TAG 401(k) Plan trustees were faced with having to replace an actively-managed Mid Cap fund that had been sucking bad over the previous year. Not only did it suck against other actively managed funds, but it didn't keep up with the index fund that it tracked. We tried to replace it with another actively managed fund, but they all were worse than the index.

So we deep-sixed the active fund and went with the index. Forbes magazine points out that indexes dominate over time.

An actively-managed five-fund portfolio held for 20 years has only a two percent chance of outperforming a comparable index fund portfolio.

Said another way, if you hold five index funds in different fund categories for 20 years, your portfolio has a 98 percent chance of outperforming a portfolio holding five comparable, actively-managed funds. ...

Even actively managed bond funds, often thought to wallop indexes, aren't so spiffy:

"On average, about 70 percent of all actively-managed bond funds underperformed their benchmarks over the five-year period ending in 2012. ..."

Factoids to think about when you're putting money into retirement investments.

401(k) Enrollment Meeting Dates (May-June)


Disney Feature - Southside Bldg.
Tue. May 14th, 10 am Rm. 1300

Thur. May 16th, 2 pm,
Conf. Rm. 101

Disney TVA - Sonora Bldg.
Wed. May 22nd, 10 am, Rm. 1172

Disney TVA - Empire Cntr..
Wed. May 22nd, 2 pm, Rm. 5223

Cartoon Network
Wed. May 15th, 1 pm,
Main Conf. Rm.

Dreamworks Animation
Thur. May 30th, 2 pm,
Dining Rm. B&C

Dreamworks - Dragons
Thur. May 23rd, 2 pm,
Main Conf. Rm.

Fox TV Animation
Wed. June 5th, 2 pm,
Main Conf. Rm.

Marvel Animation
Thur. June 13th, 10 am,
Marvel Anim. Conf. Rm.

Wed. May 29th, 2 pm,
Main Conf. Rm.

Robin Red Breast
Tue. May 21st, 2 pm,
Large Conf. Rm.
Santa Monica Bldg.

Starz/Film Roman
Tue. May 28th, 2 pm,
“Glass” Conf. Rm.

Sony Pictures Animation
Tue. June 4th, 2 pm,
North - Rm 2050

A panel discussion onf "Investing for Retirement" will be happening at the Animation Guild General Membership meeting on Tuesday, May 28. (Meeting at 7:00 p.m.; panel immediately thereafter.


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