Monday, April 10, 2006

1st quarter 2006 Mutual Fund Performance

The first quarter for 2006 just came to a close and overall it's been a good quarter for me and most investors. In reviewing mutual fund performance, it seems that international stocks continue to outperform domestic markets and small cap funds have not given up their gains to large cap funds (as most "experts" have predicted). This again reinforces the notion of appropriate asset allocation and diversification; even the experts cannot predict future market behavior.

This reminds me.. in the summer, my brother asked me to help him out with his non-retirement portfolio as he had most of it in cash. His retirement portfolio, by-the-way, is managed by a financial adviser (who happens to live in Bel Air!... hmmm, makes you wonder how many investors are subsidizing his salary). In order to advise my brother accurately, I wanted to get a sense of how his retirement portfolio was invested (stocks vs. bonds, large cap vs small cap vs. international, etc.). Of course, when I spoke to the adviser, he first asked me what I did for a living (not in the financial industry), then proceeded to drown me in a bunch of jargon stating how he was predicting the market would not do well and so he was maintaining a strong cash position, blah, blah, blah. I point-blank asked him, what is the asset allocation in the retirement portfolio so I can plan my brother's accordingly. He then tried to undermine asset allocation strategies and stated that academics had it all wrong.


Regardless, I advised my brother to invest in Vanguard mutual funds, some index, some actively managed... most with low turnover given it was a taxable account.

Needless to say, it has outperformed his retirement portfolio.

I don't take solace in this because the true measure of performance is how a portfolio does over the long-term (10 years +). But at least he didn't discourage me with all his technical jargon from advising my brother in what I think was the right direction. Unfortunately, I'm not living in any place nearly as nice as Bel Air... I wonder who really gets the last laugh?
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