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By Ian Wyatt, NewsletterAdvisors.com |
VWO | Aug 27, 2008 |
"Buy the Manager, Not the Fund"
Interview with Daniel P. Wiener
By Ian Wyatt, Chief Investment Strategist, NewsletterAdvisors.com
Explain your investment process and criteria for investments.
"My basic philosophy can be summed up this way: "Buy the manager, not the fund." At Vanguard there are a host of excellent, institutional-quality managers available to individual investors at a very low cost.
"My second fundamental belief is that a good manager running a fund with low operating expenses has a very strong chance of outperforming a comparable index fund. I seek managers who have outperformed and will continue to outperform their index bogeys.
"Third, and most important to many, is to keep risk under control. Diversification is one way of doing this. Market timing is a fool’s game and can’t be done, so the goal is to keep risk from driving you out of the market entirely. If you can lose less in a bear market, then you’ll make more over a full market cycle. We’ve done that over time in the model portfolios in my newsletter."
Who is your target audience?
"Any Vanguard investor who is confused by the overwhelming array of products offered by the Vanguard family or any investor who is looking for a cogent, diversified and smart long-term asset allocation strategy that takes advantage of both superior managers and benefits from low cost executions. Investors who believe that indexing is a panacea, and who have been roundly destroyed by following the "buy the market and wait" mentality, will find this common sense approach to asset allocation a welcome relief."
What do you believe gives you an edge over other investment experts?
"My edge comes from what I believe to be a very well thought out and communicated investment strategy that has been tested by bear and bull markets since 1991. While other advisers have come and gone, or have outright lied about their performance records, you can find mine in every issue of my newsletter. There’s no hiding behind false claims—just the facts. I tell it like I see it and have no financial or other ties to the Vanguard Group. I don’t accept advertising or have consulting contracts with the people, funds, or institutions I report on, unlike some of the name-brand fund ‘analysts.’ "
What are your short-term (three to six months) and longer-term views (one to two years) of the markets?
"Without being too flippant, I would say the markets will go up and down. What happens over the next three or six months is irrelevant to the long-term investor who’s built a well thought out and diversified portfolio of top managers, where the portfolio’s risk potential matches the investor’s risk tolerance. I believe that the financial problems we are seeing today will pass, over time, and right now the market presents some great value opportunities that will be realized over the next few years. You just have to have patience and confidence in your investment strategy."
What sectors do you think offer the most opportunities to profit today?
"Very aggressive investors will find great opportunities in the financials, but whether you can stand the risk is another matter entirely. Most investors can’t, but given how low the financials have fallen, there almost has to be opportunity there. I am a long-term believer that investors of all ages should be overweight health care."
What are your top three stock/fund picks, and what attracts you to each?
"I pick managers, not funds. I would say that long-term investors should own at least own one fund run by PRIMECAP Management. (Vanguard has one open fund, PRIMECAP Core, and there are three non-Vanguard PRIMECAP Odyssey funds available that have low minimums and are run by the same team.)
"I would also want a fund run by the Wellington team that manages Vanguard Health Care, so either buy that fund, which has a $25,000 minimum, or find a way to purchase the Hartford Global Health Care fund, which is run by the same team, but in a load format, though it can be accessed no-load through financial advisers such as my investment management company, Adviser Investments.
"Third, while there are a few good managers in the field, I’d go with an index fund and get into the emerging markets. Vanguard’s Emerging Markets Index Fund is a good one, but I prefer its ETF, with the ticker symbol VWO."
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