I don’t make any secrets of the fact that I feel a terrible love that in the world of investing dares not speak its name, that of loving actively run mutual funds. From my own years of experience, I can tell you they still represent one of the most cost-effective ways for the average investor to access both some of the greatest individual money managers of our times along but to be fair, active managers have been getting killed with something like 98% underperforming their benchmark over the last ten years (according to FT anyway.) Rather than join the crowd telling you this is just the last milestone on the path towards a world without active investing (which will never happen), let me tell you how I, a kid from the wrong side of New York (the non-NYC part) managed to create a top-performing mutual fund without even trying. Continue reading
Normally when you do one of these Monday morning posts, you wind up recapping the prior week and trying to find some tidbits of useful information to parlay into a story about how the market is shifting direction. Some Monday morning quarterbacks will point out the improving economic outlook from the Employment report and the big hits to utilities and consumer staples and say the economy is right back on track. Global macro managers will say that it doesn’t matter what happens in one report, the global economy is shot and the Fed will never hike again. Zero Hedge will say nothing ever matters because the market is rigged by the global elite in blah blah blah.
From my point of view, and at risk of sounding like a dog with a bone, I think one of the major events of the week was the announcement by Vanguard that they were closing their Dividend Growth Fund (VDIGX) to new investors after taking in more than $4 billion in new assets so far in 2016. Having seen my fair share of funds blow up after taking on way too much new money (looking at you Marketfield) I have to be honest and say that I respect any manager who’s willing to say stop, but I think the market was too quick to dismiss this as a Vanguard or a fund-specific issue. But the closing of Vanguard Dividend Growth is way more important to understanding the state of the market than simply saying the dividend income theme is played out. Continue reading