"Hey, kids! Let’s put on a show!"
or "Wal-street: America’s DIY* Center"
"Gosh, it's easy to write a book!" For the million or so financial advisers who haven’t yet written a book mapping the road to riches comes Larry Chambers’ promise that "[a] book gives you ‘authority,’ a tangible sense of credibility and position in the minds of clients, prospects, organizations, publications and the media. It is the way to position yourself as an expert . . . a published book is a great calling card, the ultimate marketing tool . . .." Larry’s advice is directed not only to the accomplished writer-CFP, but also to the person who has "absolutely no idea what you’d write about – yet . . .."
How do we know Larry’s right about this? Well, he’s written 27 books, including The First Time Investor and The Guide to Financial Public Relations. He’s got author-ity!
A reader reviews The First Time Investor at Amazon.com: "Make no mistake: I can see that Chambers is fairly intelligent, and his prose is actually not that bad. But he needs a harsher editor. The book drifts from topic to topic, and the sequence of chapters makes little sense. Especially poor are the discussions of academic theory. Chambers fails to make it clear whom he agrees with, or why."
A reader reviews The Guide to Financial Public Relations at Amazon.com: "The best book I've read on the subject! His book captured the steps I needed to take to promote myself."
"Golly, let's start a fund!" Ken Kam is promoting a new stock-picking contest at Marketocracy.com. In some ways, Marketocracy.com’s stock-picking contest is like most such contests: you get a million pretend dollars and three years in which to prove yourself. There is one difference, though: the winners in this contest don’t get a Palm Pilot or a subscription to Hot Stocks Today or even a mountain bike. They get to manage a real mutual fund for the Firsthand funds. ["Amateur Traders Get a Chance to Turn Pro," Wall Street Journal, July 17, 2000]
For folks who can’t wait three years to embrace the joy of money management, new Web site Foliofn.com offers the opportunity to construct your own mutual fund from their basket of individuals stocks and pre-picked stock folios. For $300 per year (just 0.3% of a $10,000 investment), Foliofn promises "instant diversification" and the ability to escape "hidden fees and unwanted taxes of mutual funds." Apparently, you’re still stuck with those adorable "wanted taxes". Fortunately Foliofn gives you a chance to generate lots of wanted taxes by offering essentially unlimited stock trading ("the ability to trade entire FOLIOs at once, rebalance FOLIOs as often as you wish") and allows you to charge your membership fees on your credit card (at around 18%).
Foliofn advertises itself as "the unmutual fund, " "the first real alternative to individual stock picking and mutual funds," and devotes a fair chunk of space to answering the question, "Why Folios are better than mutual funds." Which makes it a bit odd that American Century Ventures, the venture-capital arm of the American Century mutual funds, invested in Foliofn. "We believe Foliofn is another part of the arsenal for investors," American Century’s spokeswoman Beth Randolph says. "We see it as more of a complement to our business. And we want to be part of it, instead of on the sidelines."
Dawn Smith, "Sleeping with the Enemy?" SmartMoney.com, July 14, 2000
*FundAlarm didn't know that "DIY" stands for "Do-It-Yourself." We offer this gloss for other household-challenged readers.
"Judge Not, Lest Ye Be Judged."
Behind the cover story, "How to Judge Your Mutual Fund Manager," Barron’s has released its latest list of the world’s 100 best mutual fund managers. Andy Stephens of Artisan Midcap tops the list, followed closely by James Callinan of RS Emerging Growth and Ron Ognar of Strong Growth 20. Curiously, the article doesn’t say squat about how to judge your mutual fund manager, but apparently inexperience is good: the top-10 managers average fewer than four years on the job. And not a single manager logged in at 10 years or more with a listed fund. That’s because of a "quirk" in the system: By including all the years of a manager’s experience in the calculation, the managers whose experience is limited to the past few giddy years have the easiest time making the list. The absence of Bill Miller (and Spiro Segalas and Gary Pilgrim and Mario Gabelli . . . .) is the result of the quirk.
Number of diversified, domestic equity funds with the same manage for a decade or more and which landed in the top quarter of their peer group over the past three, five, and 10 years: 9 [they are: Evergreen Omega, Gabelli Value, Harbor Cap App, Heritage Cap App, Legg Mason Value, Pioneer, Smith-Barney Aggressive, Vanguard Extended Market Index, Weitz Value].
Number of those funds in the Barron’s/Value Line top-100: 0.
The publication’s utter inability to justify using this particular set of numbers as a predictive device is, presumably, another quirk. "The ranking is an important tool, and I stress tool," according to the survey’s author, Reuben Gregg Brewer of Value Line Mutual Fund Survey (the folks who recommend that long-term investors keep 22% of their portfolios in emerging market stocks). "It gives the investors a different view."
The question, of course, is whether the view gives you any idea of where your fund is going, or just where it’s been. To try and find out, I went back to the top ten managers in the 1997 list and tracked their success going forward. Here’s what I found: exactly five (50%) out-performed the Russell 3000 index over those three years and 10 of them (100%) had higher volatility than the index. Three of the top ten managers have left the funds for which they were touted: Robert Sanborn from Oakmark (a FundAlarm 3-Alarm fund), Gerald Zukowski from Putnam Capital Appreciation (another 3-Alarm Fund) and Fariba Talebi from Schroder Smaller U.S. Companies. Six of the ten Immortals disappeared from this year's list, and the four remaining managers have dropped by an average of 55 spots.
At the other end of the 1997 list were the ten worst funds, half of which have disappeared with a trace and only one of which (Pin Oak Aggressive Stock) has rebounded with a vengeance. That offers scant contrarian hope for this year’s three worst: T.H. Fitzgerald/Reserve Informed (?) Investors, Christine Baxter/PBHG Core Growth and Robert Colin/Pax World Growth.
"How to Judge Your Mutual Fund Manager," Barron’s, July 17 2000: "Understanding Value Line’s Manager Ratings," www.Valueline.com/news, 17 July 2000
"Gimme Shelter from the Storm."
Investors seeking some stability in their portfolios might have been thinking about stashing some cash in traditional safe havens: money market accounts, short-term bond funds, stock/bond hybrids, equity income. Just in time to save them from such folly comes Fortune’s pick for the fund to help you escape "the feeling – that constant worry about exactly what this helter-skelter volatility is going to do to your portfolio each week." Their best answer: the White Oak Growth Stock fund.
Yes, a marvelous fund. But a storm shelter? Well, yes . . . if your core holdings are Amerindo Tech, Kinetics Internet and Van Wagoner Emerging Growth, then White Oak is going to be a sight for sleepless eyes. But if your portfolio tracks the Total Stock Market, then the fact that White Oak is 30% more volatile than the market as a whole and has a standard deviation of twice the market’s (around 40) may cause you to look a bit deeper. Morningstar opines that White Oak offers "a fairly wild ride" (analysis 4/17/2000), was subject to "dizzying drops" (analysis 5/21/1999), its "risk scores are among the highest" in its group (analysis 12/18/1998), its been known to "hit an air pocket" (analysis 7/23/1998), and so "it’s for the truly risk-tolerant only" (analysis 4/25/1997).
Lee Clifford, "Three Funds for a Volatile Market," Fortune, 24 July 2000