First Portfolio

[Evan]

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in the past, D&C has closed their offerings when they felt they could not manage a larger amount of money efficiently.

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That's great, but I've got to believe it's a lagging indicator in this case.

Their largest holding being 3.3% doesn't necessarily mean I would trust historical data as a predictor of future performance.

[SlowHabit]

Get these from Vanguard while you learn more:

45% Total Stock Market
50% Total International
5% REITs

[Trencherman]

Jeff, what alternatives to DODFX have you considered? I assume the Fidelity Spartan International Index Fund (FSIIX, ER 0.10%) was high on your list? For international index funds, it and the Vanguard ETF offerings VGK (Euro) and VPL (Pac) (ER 0.18%) seem highly regarded.

[Jeff W]

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Jeff, what alternatives to DODFX have you considered? I assume the Fidelity Spartan International Index Fund (FSIIX, ER 0.10%) was high on your list? For international index funds, it and the Vanguard ETF offerings VGK (Euro) and VPL (Pac) (ER 0.18%) seem highly regarded.

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Yes, I mentioned all those in this post. I'm not sure what I'm going to go with, but I'll probably just gamble with DODFX. I don't really know how to pick the best one--nor do I see how I can possibly figure out which one is best EV.

I just wish there were so many good options for small cap international. Hell, ditto for small cap domestic.

[Jeff W]

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Get these from Vanguard while you learn more:

45% Total Stock Market
50% Total International
5% REITs

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I shouldn't buy REITs for a taxable account, yes? Taxes add effectively 2% ER there(for the Vanguard fund last 10 years).

I'm tempted to do some KISS allocation like that, but I figure I should just bite the bullet and pick an allocation in the next day or so. I've already done 30 hours of research or so the last few days and I'm just not sure how much more I have to gain by further research(aside from some nuances like bid-ask spreads for ETF and tax loss harvesting). The research is really distracting me from my poker.

I'm leaning towards the allocation I posted in the other thread here possibly with DODFX in place of FSIIX. Alternately, I'll do something simple with primarily Vanguard funds even the probably suboptimal smallcap and value funds, possibly with DLS (International Small Value ETF) and DODFX for International Large Value.

[BeL0wMe]

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Evan,

Is expectation of future price increases built into the price of mutual funds like it is for stocks? I know it is intrinsically because they track stocks, but if for example everyone thinks DODFX will do well in the future, will it be overpriced?

The other Dodge and Cox funds have outperformed their indexes over 10-year periods. Additionally, the fund's ER is only .3% higher than comparable index funds.

Do you really think my EV is higher going with an international index fund?

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I'll start at the end. I have no idea what the EV of this fund is so I certainly have no idea if it's higher or lower than any one of many international index funds. Just want to make that clear.

So now more people see that this guy is awesome. So they give him money. Now he's gone from 7 or 8 figures to 10 figures. All of the sudden there's just not a big enough market for some of his ideas. Let's say he made 20% one year by buying Apple right before Macworld. With the bigger portfolio he's not going to be able to pour as much money into that stock without running the cost up on his own (okay I lied, I am talking about transaction costs).

So the point I'm making is that as funds become "THE fund" and more money gets pumped into it it becomes increasingly hard for the managers to maintain their performance even if they previous performance was 100% a product of skill. It's not really the same supply/demand market as the stocks themselves, but logically the market is going to set the price for both in this fashion.

Now obvious the ideal size is not 1 cent, but the point on the high side still stands.

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A couple of things here Evan, by not knowing who Dodge and Cox is, you've pretty much lost all credibility about feigning any knowledge about mutual funds. Second, you do realize D&C has a great record of closing their funds when they get too large don't you? Look at DODGX, it's one of the 10 biggest funds out there, and it still decimates the SPX. The managers had the sense to close it when it was getting bigger, now it can chug along with its desired asset base. Do a little more research before you start deifying Bogle because you're coming off as plenty ignorant.

[Tupacia]

Yes Dodge and Cox funds have a good record. Unfortunately for you, large amounts of academic research has found that there is no correlation between past performance and future performance for mutual funds. Sorry to burst your bubble.

[Evan]

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Evan,

Is expectation of future price increases built into the price of mutual funds like it is for stocks? I know it is intrinsically because they track stocks, but if for example everyone thinks DODFX will do well in the future, will it be overpriced?

The other Dodge and Cox funds have outperformed their indexes over 10-year periods. Additionally, the fund's ER is only .3% higher than comparable index funds.

Do you really think my EV is higher going with an international index fund?

[/ QUOTE ]
I'll start at the end. I have no idea what the EV of this fund is so I certainly have no idea if it's higher or lower than any one of many international index funds. Just want to make that clear.

So now more people see that this guy is awesome. So they give him money. Now he's gone from 7 or 8 figures to 10 figures. All of the sudden there's just not a big enough market for some of his ideas. Let's say he made 20% one year by buying Apple right before Macworld. With the bigger portfolio he's not going to be able to pour as much money into that stock without running the cost up on his own (okay I lied, I am talking about transaction costs).

So the point I'm making is that as funds become "THE fund" and more money gets pumped into it it becomes increasingly hard for the managers to maintain their performance even if they previous performance was 100% a product of skill. It's not really the same supply/demand market as the stocks themselves, but logically the market is going to set the price for both in this fashion.

Now obvious the ideal size is not 1 cent, but the point on the high side still stands.

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A couple of things here Evan, by not knowing who Dodge and Cox is, you've pretty much lost all credibility about feigning any knowledge about mutual funds. Second, you do realize D&C has a great record of closing their funds when they get too large don't you? Look at DODGX, it's one of the 10 biggest funds out there, and it still decimates the SPX. The managers had the sense to close it when it was getting bigger, now it can chug along with its desired asset base. Do a little more research before you start deifying Bogle because you're coming off as plenty ignorant.

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Neither in the post you quoted, nor anything else I've ever written in my life, have I claimed to know anything about specific managed funds. I suspect I never will. My post had nothing to do with any specific managed fund. It was about economics, and I don't need to know who the LP's at this fund are to talk about that.

I'm not entirely sure what you think I said that was ignorant. Your post reads something like this to me.

"D&C is big, you ought to know it."
"D&C closes their fund when it's too big, I think they do a great job of it but I'm not going to articulate why I'm in any way qualified to make this distinction"
"You were right, the historically best funds to become the biggest"
"Their past history is excellent"
"Something about chugging along, which doesn't sound like a very good thing"
"You're stupid!"


Basing future expectations on historical performance not only doesn't make much sense, it's been empirically proven to not work. What is the threshold for amount of money they can "chug along" with? What they have now? 10% more? 15% less? What happens if whoever is running the show retires? You can't just claim they're doing the right thing and not explain it. They get paid based on a management fee so it's in their best interest to have the most money they possibly can under management. Obviously they have to keep in mind that significantly impaired returns would hinder their image, but it still makes sense that shutting the fund would be a lagging indicator for two reasons. First, simple, people are naturally greedy. Second, it's not a science to determine how much you can effectively manage, it's a lot of guesswork and it would pay for them to err on the side of taking in too much.