How I learned about chasing performance
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How I learned about chasing performance
I wasn’t taught how to invest. I started investing in 1995 when a knowledgeable relative said I should put my long term savings in no load mutual funds. I didn’t know anything, but I got a Fortune magazine and found two fund advertisements that looked nice. Ordered the application and split the money between the two. One was aggressive growth, the other was a balanced fund that specialized in picking value stocks for the equity side. Not a horrible decision at that point (I didn’t know anything about ER or asset classes like growth, value, or barely even the difference between stocks and bonds then but just picked them based on advertisement). My thought was that I would see what happened with each after a few years and then if one is better than the other, I’ll move my money (can you see where this is going haha?).
So in 1999, you can imagine I was pretty surprised at the growth – especially in the growth stock fund.
So I thought “Well, the people that own that fund must be smarter than the people that own the other”. In mid-late 1999 I rolled over everything from the balanced fund to the growth stock fund. I congratulated myself on my money wisdom for a few months, and then promptly started to lose all my gains when the dot com bubble burst. A year later I saw that the balanced fund that I dumped was doing pretty well.
After that I learned about types of assets and embarked on a slightly improved strategy. The plus side is I’ve been able to teach my kids early.
Just sharing my experience, I’m sure one or two people here have been burned at some point and can relate.
So in 1999, you can imagine I was pretty surprised at the growth – especially in the growth stock fund.
So I thought “Well, the people that own that fund must be smarter than the people that own the other”. In mid-late 1999 I rolled over everything from the balanced fund to the growth stock fund. I congratulated myself on my money wisdom for a few months, and then promptly started to lose all my gains when the dot com bubble burst. A year later I saw that the balanced fund that I dumped was doing pretty well.
After that I learned about types of assets and embarked on a slightly improved strategy. The plus side is I’ve been able to teach my kids early.
Just sharing my experience, I’m sure one or two people here have been burned at some point and can relate.
Re: How I learned about chasing performance
Thanks for sharing. You've only been on the board a week, so, how are you investing now?
Paul
Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Re: How I learned about chasing performance
Great story! Thanks for sharing. Horse's mouth and all that.
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Re: How I learned about chasing performance
I'm sure many here can relate. I got into one of the hot Janus funds around that time and lost some money too. Thankfully it was a cheap learning experience. I seem to remember the added "bonus" of a big capital gains distribution and the associated taxes. Back in the day I was in the top tax bracket, so there was an added lesson there!Stargazer65 wrote: ↑Tue May 18, 2021 7:41 am I wasn’t taught how to invest. I started investing in 1995 when a knowledgeable relative said I should put my long term savings in no load mutual funds. I didn’t know anything, but I got a Fortune magazine and found two fund advertisements that looked nice. Ordered the application and split the money between the two. One was aggressive growth, the other was a balanced fund that specialized in picking value stocks for the equity side. Not a horrible decision at that point (I didn’t know anything about ER or asset classes like growth, value, or barely even the difference between stocks and bonds then but just picked them based on advertisement). My thought was that I would see what happened with each after a few years and then if one is better than the other, I’ll move my money (can you see where this is going haha?).
So in 1999, you can imagine I was pretty surprised at the growth – especially in the growth stock fund.
So I thought “Well, the people that own that fund must be smarter than the people that own the other”. In mid-late 1999 I rolled over everything from the balanced fund to the growth stock fund. I congratulated myself on my money wisdom for a few months, and then promptly started to lose all my gains when the dot com bubble burst. A year later I saw that the balanced fund that I dumped was doing pretty well.
After that I learned about types of assets and embarked on a slightly improved strategy. The plus side is I’ve been able to teach my kids early.
Just sharing my experience, I’m sure one or two people here have been burned at some point and can relate.
- BrooklynInvest
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Re: How I learned about chasing performance
Great story.
The fact that you analyzed the situation accurately and evolved your approach speaks volumes. Demonstrated wisdom to share with the kids - love it.
The fact that you analyzed the situation accurately and evolved your approach speaks volumes. Demonstrated wisdom to share with the kids - love it.
- retired@50
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Re: How I learned about chasing performance
Some people learn by doing, and other people learn from others' mistakes.
Being the youngest sibling in my family, I've learned much by witnessing others' mistakes.
It's pretty odd though, how the human brain works, because nearly everyone initially thinks chasing performance is the winning strategy.
Regards,
Being the youngest sibling in my family, I've learned much by witnessing others' mistakes.
It's pretty odd though, how the human brain works, because nearly everyone initially thinks chasing performance is the winning strategy.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Re: How I learned about chasing performance
This is so common that it almost seems to be hardwired in our human brains. I think it is very difficult for people to learn this lesson on their own. Most have to be taught and that is not particularly easy. Stories like this can be helpful.retired@50 wrote: ↑Tue May 18, 2021 9:22 am It's pretty odd though, how the human brain works, because nearly everyone initially thinks chasing performance is the winning strategy.
It's like a flock of little kids trying to play soccer - they all just naturally chase the ball....which is just useless.
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Re: How I learned about chasing performance
Pretty standard boring stuff since mid-2017. Currently long term retirement savings strategy:
Roth IRA: Target Date Index Fund
Company 401K: Target Date Index Fund
401K linked Fidelity Brokerage Account: 3 Fidelity Index Funds (FSKAX, FTIHX, FXNAX) AA matching the Fidelity recommended growth pie chart (46%, 20%, 34% respectively).
This is different from the 2000-2017 years when I added to a mix of company stock, and about 8 or 9 mutual funds to cover a range of asset classes. I did dabble a little in trying to pick some undervalued individual stocks during that time, but then decided it was a bad idea and rolled them into similar asset class mutual funds. In 2017 I decided to go 100% index funds when I realized how much money I was spending on fund expenses.
Re: How I learned about chasing performance
Your opening line strikes home as it describes what's happening in many homes and schools: nobody taught how to invest. Probably many Bogleheads also weren't taught how to invest and gradually learned by trial and error, as I did. Thanks for sharing your experience.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
Re: How I learned about chasing performance
This is how a lot of us got started.
I looked at the Morningstar webpage then filtered by the star rating. 4-stars? Great. 10-20% over the past few years? This is a no-brainer...
I looked at the Morningstar webpage then filtered by the star rating. 4-stars? Great. 10-20% over the past few years? This is a no-brainer...
Re: How I learned about chasing performance
Thanks for sharing. I advise younger investors from time to time, and I typically see the same things over and over again: nodding heads as I speak, arguing for broad market exposure, discipline, and longterm thinking. Then those same folks with nodding heads end up with a hefty chunk of Bitcoin in their portfolios in the next month or two. In the late 90s it was dot-com companies that were valued on "views" and "clicks." Today, it's Bitcoin. There's always something new to separate a fool from his money.
Humans....
It's funny how the young seem to discount the lessons of their elders, but they do, time and again.
Have you heard the saying "you can lead a horse to water, but you can't make him drink"? It's so true.
I'm not saying any of this is you, OP. You just got me to thinking about things.
Humans....
It's funny how the young seem to discount the lessons of their elders, but they do, time and again.
Have you heard the saying "you can lead a horse to water, but you can't make him drink"? It's so true.
I'm not saying any of this is you, OP. You just got me to thinking about things.
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Re: How I learned about chasing performance
How many of us owned FMAGX back in the day?
“Now shall I walk or shall I ride? |
'Ride,' Pleasure said; |
'Walk,' Joy replied.” |
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― W.H. Davies
Re: How I learned about chasing performance
I don't even think that mistake is limited to noobies. Time and again I'll see someone commenting on a fund - maybe a Mutual Fund, maybe a University endowment, maybe the Social Security Trust Fund, and say "They're doing terrible, they haven't even kept up with the S&P 500."
As if the goal of any fund management is simply to beat the S&P.
As if the goal of any fund management is simply to beat the S&P.