How to Buy a Glider Afordably, or Euro vs ContraFund

I see you guys need to take in course in Investing 101.

"Chasing returns" means buying a fund that is the top category
performer in a given time period, be that a month, quarter, or year.
Then, at the end of that period, you sell that fund and buy whatever is
the new top performer.

I, on the other hand, find fund managers (note that I didn't say
"funds") that are consistently in the top 10-20% of their peers over a
long period of time. In the case of the Contrafund they have been in
the top 20% for a 10 year period. This does not happen by luck. And I
don't think they were THE top performer in any of those years, but that
is unimportant to me. Rarely do I have to dump a fund that has been a
consistent performer in the past, but it does happen. I am a long term
investor, a bad quarter or two can be overlooked.

Your complaint about the expense ratio shows you haven't done your
research: the Contrafund is one of the cheapest in its category, which
is 1.26%. Believe it or not, but you have to pay these guys to manage
your money. Perhaps you are independently wealthy and work for free,
but I have no idea.

Tom

misc.invest
or
misc.invest.funds
or
misc.invest.misc

might be a good place to post these comments and get
some more relevant feedback.

Happy Thanksgiving!

At 08:30 26 November 2005, wrote:
I see you guys need to take in course in Investing
101.

'Chasing returns' means buying a fund that is the top
category
performer in a given time period, be that a month,
quarter, or year.
Then, at the end of that period, you sell that fund
and buy whatever is
the new top performer.

I, on the other hand, find fund managers (note that
I didn't say
'funds') that are consistently in the top 10-20% of
their peers over a
long period of time. In the case of the Contrafund
they have been in
the top 20% for a 10 year period. This does not happen
by luck. And I
don't think they were THE top performer in any of those
years, but that
is unimportant to me. Rarely do I have to dump a fund
that has been a
consistent performer in the past, but it does happen.
I am a long term
investor, a bad quarter or two can be overlooked.

Your complaint about the expense ratio shows you haven't
done your
research: the Contrafund is one of the cheapest in
its category, which
is 1.26%. Believe it or not, but you have to pay these
guys to manage
your money. Perhaps you are independently wealthy and
work for free,
but I have no idea.

Tom


Mark J. Boyd

Boy, this is a tough crowd. Just what part of 20% don't you like?

My strategy is DEFINITELY NOT "chasing returns", but you probably
wouldn't understand the difference even if I explained it, so I will
skip it.

You realize, of course, that ALL mutual funds charge fees? What do you
think, that they work for free? Do you even know that the performance
figures already include the fees?

Your reply rings of sour grapes to me. Exactly what is your strategy
for investing your money for the next 12 months? Please don't say
you'll stick it in a mattress!

Tom

BB wrote:

In the business, we call this "chasing past return", an investment
fallacy sort of like setting the MacCready value on the last thermal.
The catch of course is if that they don't stay in the top 20-30% of
peers, you've already lost your money.

Mmmm. Perhaps an imperfect metaphor. McCready theory says to set the
ring to the expected thermal strength for the day and FLY THE WHOLE DAY
ON THAT SETTING! Luckily, most of us modify theory with experience as
we go along or I'd have done a lot more outlandings.

I know 'buying proven performers' is imperfect but, like Churchill said
about democracy, it's better than the alternatives. In a world where
you can actually pay good money for advice to buy the failures, Tom's
ideas are at least not obviously irrational.

Go Tom.
GC

I looked up contrafund just for fun

http://quicktake.morningstar.com/Fun...A&Symbol=FCNTX

Looks like they made one good move in not losing as much as the average
2001-2003; other than that they track large cap growth pretty
perfectly. And they charge a hefty 0.92% expense ratio!


John Cochrane
BB

M B wrote:

misc.invest
or
misc.invest.funds
or
misc.invest.misc

might be a good place to post these comments and get
some more relevant feedback.

No. I'm enjoying it and learning. Like Tom, I have to buy my gliders
from investment income.

GC


Happy Thanksgiving!

At 08:30 26 November 2005, wrote:

I see you guys need to take in course in Investing
101.

'Chasing returns' means buying a fund that is the top
category
performer in a given time period, be that a month,
quarter, or year.
Then, at the end of that period, you sell that fund
and buy whatever is
the new top performer.

I, on the other hand, find fund managers (note that
I didn't say
'funds') that are consistently in the top 10-20% of
their peers over a
long period of time. In the case of the Contrafund
they have been in
the top 20% for a 10 year period. This does not happen
by luck. And I
don't think they were THE top performer in any of those
years, but that
is unimportant to me. Rarely do I have to dump a fund
that has been a
consistent performer in the past, but it does happen.
I am a long term
investor, a bad quarter or two can be overlooked.

Your complaint about the expense ratio shows you haven't
done your
research: the Contrafund is one of the cheapest in
its category, which
is 1.26%. Believe it or not, but you have to pay these
guys to manage
your money. Perhaps you are independently wealthy and
work for free,
but I have no idea.

Tom



Mark J. Boyd

At 08:30 26 November 2005, wrote:
I see you guys need to take in course in Investing
101.

Wow Tom!

Maybe you don't know that BB TEACHES Investing 101,
and 202, and 303, at arguably the finest graduate school
of finance in the country.

Maybe you'd like to rear back and call all those Nobel
Prize winners ign'rent too.

Now, back to the dart board.

9B

Whatever he's teaching, it AIN'T INVESTING!

Investing involves putting your money at risk for potential gain. Let
me repeat, YOUR MONEY, not someone else's money, YOUR MONEY! Everytime
you make a mistake, YOU feel the pain, not someone else. BB shows clear
ignorance of basic investing fundamentals. I'm sorry, but that is the
way it is.

Tom

Andy Blackburn wrote:

Maybe you don't know that BB TEACHES Investing 101,
and 202, and 303, at arguably the finest graduate school
of finance in the country.

I suspect Tom picked up that little point because:
a) BB said "in the business..."
b) He read BB's email address (...gsb.uchicago.edu)
c) There was a definite note of authority (condescension?) about how he
came to grips with Tom's thoughts on investment.

I thought the difference was that Tom was risking his own money while BB
taught people who (largely) intended to earn a fairly secure living
investing other people's. Tom wants to get GOOD returns. I'd guess BB
teaches that anything above average is pretty much only luck.

Maybe you'd like to rear back and call all those Nobel
Prize winners ign'rent too.

No. But if you're aiming to make money instead of just not losing it,
maybe them Nobel folks aren't all that relevant. Making money is as
much art as science. If it were otherwise it'd be impossible to staff
graduate schools of finance.

Best regards,
GC

At 09:48 27 November 2005, Graeme Cant wrote:

I thought the difference was that Tom was risking his
own money while BB
taught people who (largely) intended to earn a fairly
secure living
investing other people's.

Aren't you giving your money to the latter? Are you
saying in addition one should only pick fund managers
who didn't study finance, or what exactly?

But if you're aiming to make money instead of just
not losing it,
maybe them Nobel folks aren't all that relevant. Making
money is as
much art as science.

I'll stick with science. The Wall Street Journal regularly
puts the 'artists' up against a dart board (or more
recently a gorilla) over the course of a year - guess
who wins?

When I was a student, one of the school's Nobel-winning
finance guys was interviewed by an editor from a business
magazine. He was asked, 'If you guys are so smart,
how come you're not rich?' He answered, 'Many of us
are.'

But hey, it's your money so whatever makes you feel
good. ;-)

So... I think the practical advice we've gotten out
of this - as applies to glider pilots - is:

1) If you have a glider on order, put your money in
the ContraFund instead of any other stock or bond fund
or any individual stocks, because the ContraFind will
continue to outperform 75% of stock funds over the
next year (net of fees).

2) Don't buy Euros now, because Euros are definitely
getting cheaper over the next 12 months.

I think those were the basic points. Maybe it'll turn
out to be good advice.

9B

Your comments are exactly on point. If you could really teach investing
to all of those MBAs everybody investing in the market could only earn
an average return because market intelligence is evenly distributed. Of
course this is not the case; funds managed by business school graduates
have returns all over the map. My goal is to identify those managers
who CONSISTENTLY beat their peers. The Contafund has a 10 year
compounded rate of return of 12.4%, beating the S&P 500 by nearly 3%.
Perhaps BB ought to ask Will Danoff (the fund manager) to lecture his
class; I think they would learn a lot from him. Will, btw, has an MBA
from Wharton.

Tom