Know When to Dump a Losing Fund

A recent post from MarketWatch by Chuck Jaffe, ‘Know When to Dump a Losing Fund’, highlights the importance of measuring your holdings against the right benchmark. Chuck notes that Vanguard finally changed the manager for their US Growth Equity Fund (VWUSX) after a decade of underperformance. In the words of Chuck, “over the past decade, US Growth has been slaughtered, turning a $10,000 investment into $4,850”.

Check out VWUSX’s performance against an appropriate benchmark at LikeAssets. The fund has continuously underperformed, with LikeAssets scores ranging from -8 to -15 in recent years.

With LikeAssets, it’s easy to monitor your investments against the right benchmark. Give it a try for free. Enter one or two of your favorite investments in seconds and start monitoring today.

You can now find LikeAssets in the Seeking Alpha App Store!

Today at Finovate our partner, Seeking Alpha, unveiled their new app store which includes a new application from LikeAssets.

On October 10th, the app store will go live to Seeking Alpha’s audience of investors, advisors and contributors. Our application has some exciting new features, such as automated download of your brokerage data with return calculations, a choice of benchmarks, asset classification, and more.

We’ll be offering two versions of the application – one that’s completely free, which offers easy portfolio management and accurate return calculations, and a premium version that includes all of the powerful features that LikeAssets has to offer.

Check out the app store at Seeking Alpha starting on 10/10 and let us know what you think! We’ll be listening to your feedback and will incorporate some of your favorite new features into LikeAssets.com.

Helping investors understand alpha

There has been noteworthy discussion in recent articles about alphas and betas. It can get pretty confusing for an investor. Beta is a tool for measuring the sensitivity of the asset’s returns to market returns. It answers the question, “how much market risk are you bearing relative to the market itself?” A Beta of 1 means that the security moves pretty much in sync with the market and a beta of 0 means it moves independent of the market. Alpha provides a performance measurement of excess return over a risk adjusted market return (an appropriate benchmark, for example).

Roger Nusbaum posts about the alpha/beta debate and also refers to a post at The Capital Spectator which challenges the very existence of alpha, citing recent work done by John Cochrane from the University of Chicago. Roger lays out his case for why he still sees a world with alpha, but his post helps investors understand both arguments and become better educated on this critical topic.

Rating the Raters - a Closer Look at Morningstar Stock and Mutual Fund Picks

Who rates the raters?

I thought it would be interesting to take a close look at the picks made on Morningstar.com since the beginning of 2009. Morningstar offers both free and premium services. This analysis refers only to the free advice investors could obtain from the various columnists.

If an investor followed every Morningstar stock pick over the last year and a half, he would have scratched out a slight premium to the market return. However, the mutual fund picks failed to deliver any value above their benchmark indexes. This is surprising since mutual fund research is Morningstar’s bread and butter.

Stock Picks

• Out of 529 picks, 287 generated a positive return and 242 generated a negative return.
• Generated a total average return of 6% and a median return of 3%.
• 282 performed better than the LikeAssets Benchmark, and 247 performed worse.
• Outperformed the LikeAssets Benchmark, with an average LikeAssets Score of 4%.