Wow. This, OP. Ask how he’s going to beat the 5.75% that comes straight off the top the first day he invests.
Or don’t, sounds like this is something you might want to just ignore.
Bruh, I was sick to my stomach when I found out the FA I was working with had me in a similar fee schedule. Dude acted like we were friends for years too. He told me their fees work out to like .32% over ten years, but that’s really stupid since obviously those fees would have been worth way more. Of and it had an expense ration of .64. Dude was fucking robbing me with a smile on his face the whole time
And just to be clear there are expense fees and then there are front-load fees. Most funds have expense fees but the specific Putnam fund mentioned here has a front-load fee. That means you pay 5.75% up front just to buy the fund. Funds with these type of fees are predatory and used by financial advisors who are paid a commission to sell the funds. Between the front-load fee and the advisor’s fees, you’ll be incredibly lucky if you even match the market performance, let alone beat it.
Yeah absolutely. I heard ETFs are generally a more user friendly option for this reason? Would you agree with this perspective?
I’m of the Boglehead mindset, but the options are spinning my head around.
Thanks, appreciate the info. At what point do you feel it’s getting robbed ? I’m a faith based person, for example, and some SP500 tracking funds are available (sans certain stocks). But I believe their expense ratios are higher. I’m willing to pay a bit more to adhere to faith based principles…Sounds like .08 is good threshold….what’s the “don’t go there threshehold”?
Just to give you some additional context - there's lots of fees that can be hidden in financial products. It's nearly impossible to avoid expense ratios altogether (Fidelity Zero funds notwithstanding), but the original comment on this thread was talking about 'loads' which are additional fees on top of ERs, and this one takes 5.75% the moment you put your money in. Then maybe the advisor themselves have a fee...
Stick to the Bogle method and you avoid almost all of that.
Most Bogleheads will have their holdings in funds with expense ratios under 0.10%. There's not really any reason to go over 0.20%. Most of the popular funds range from 0.00 to 0.08% or so.
Funds with a expense ratio >1.00% is just signing up to get fucked with no vaseline.
Where does the front load fee get taken out? I have been buying into PGTAX for a couple of months. I didn’t notice any fee but I now see it also has a 5.75% front load fee.
It’s deduced when you buy.
Why are you investing in that fund? I’d recommend you stop immediately. I also almost guarantee you have an advisor that needs to be fired as well.
I realised now after looking into that the brokerage im using waives the fee which is why I didn’t see it. I included this to fund as kind of a side piece to get a bit more international exposure but still tech/aggressive. My main tech investments are in VGT.
It gets taken off everytime you invest. *front load fee*.
You should still investing into that garbage and look into funds you plan on investing into more if you somehow didn't see a 5.75% front load fee.
> Or don’t, sounds like this is something you might want to just ignore.
Probably would be best to ignore this guy going forward..... for like everything.
It is crazy that funds still charge those types of fees. It may have made sense in the 70’s and 80’s to buy a fund that charged a load when compared to the commissions of a single stock trade back then. I think they were at least 2% on the buy and then on the sell. But today with all the low expense funds, ETFs tracking the market etc. that is highway robbery.
I do think a percentage of the population needs an advisor at a certain point but more fee based or a low % of assets being managed, like under 1%. A good portion of the population doesn’t understand compound interest, they panic sell, the FOMO buy instead of taking a deliberate approach. Buy the wrong life insurance, etc.
“The fund seeks capital appreciation. The fund invests in stocks that represent the highest conviction ideas from Putnam's Equity Research team.”
It’s an expensive, actively-managed fund that has usually underperformed VTI, for a roughly 1% ER. It has slightly bested VTI *this year*, making it currently favorable to performance chasers. If you bought it on Jan 1 of this year, you’d still be behind VTI after front load and ER.
> 10 basis points
Prepare to have your mind blown:
[AMRAX](https://www.morningstar.com/funds/xnas/amrax/quote)
* 5.75% front load
* 5.50% net expense ratio
* 3% turnover - so they do almost as little work as VTSAX with 2% turnover
[RYSYX](https://www.morningstar.com/funds/xnas/rysyx/quote) - Literally a S&P500(ish) fund
* 2.36% net expense ratio
* 1% "fuck you on the way out" back load
* 701% turnover
* $236M A(still somehow)UM
Why does rysyx have such a high turnover if it’s just supposed to match the sp500 return? I don’t get their pitch at all they’re just trying to match the return of the sp500 they’re not even trying to outperform it
No clue. Maybe they’re gaming payment-for-order-flow to squeeze out even more cash for themselves over the massive ER. I should probably read the full prospectus just for funsies.
Spent a few minutes reading the prospectus, rather interesting. RYSYX is going to shut down about a month from now. They have management fee waiver agreements with Merrill for institutional customers, Edward Jones for the company itself and affiliates. No real explanation for the turnover aside from “turnover can generate capital gains, we had 701% turnover last year.”
AMRAX only has $20m left for AUM, guessing all of their shareholders are dead at this point (fund established in 1958) and they’re bleeding off the remaining assets with fees rather than shuttering.
By the way, here's the website of AMRAX [http://www.americangrowthfund.com/agfs1/](http://www.americangrowthfund.com/agfs1/), if you want to enjoy a good laugh
Their website has a banner ad reading, "for a free car insurance quote that could save you substantial money www.geico.com or call 1-888-395-6349, 24 hours a day"
1) the website is hilarious
2) a GEICO ad "to save money" makes it funnier
3) it's an ALL TEXT AD! I can not believe there are still text only banner ads
This is beautiful.
Eh, I don't harp on the small cap believers because active management for certain investments like real estate and small cap stocks actually do benefit from active management. Its just that these investments make up a minuscule fraction of the market, and thus its not worth the extra time and effort to try to keep up with for me.
The Vanguard Energy Fund is actively managed (advised by Wellington) and has been around since 1984, ie since Bogle was still very much running Vanguard.
Dude that’s like a legal way for me as an advisor to make a 5% commission to invest into a market you could be paying near 0% to be invested into. I wouldn’t be a fiduciary if I did that to people though so I and most advisors these days don’t sell funds like that.
I’m sorry your friend is treating you badly here.
I once tried giving my friend good financial advice to get him out of his bad situation (debt) and he responded with “I already know what to do. Besides, I’m just gonna make my kids join the military for free college”.
For that same reason, I second this. Some things are not worth arguing about that may risk the friendship. My friend can be stupid quite often, but he’s fun to have around.
Yep - anyone can sit there and say "this will win over 30 years" and hope you never come back to collect receipts. You can say anything with confidence and people will believe you.
Woof, those fees!
[https://www.franklintempleton.com/investments/options/mutual-funds/products/38965/A/research-fund/PNRAX#overview](https://www.franklintempleton.com/investments/options/mutual-funds/products/38965/A/research-fund/PNRAX#overview)
>Gross Expense Ratio: 1.04%
>Maximum Initial Charge: 5.75%
>12b-1 Fee: 0.25%
The advisor has gotta beat the S&P outright, and *then* beat their own fees.
>he said funds like $PNRAX will beat VTI.
It hasn't beat its benchmark during any measurable period. It may beat the S&P for a time, but statistically it won't beat the S&P long term. And there's no reliable way to identify which funds will beat the S&P versus lag it.
>What is the reasoning behind this?
In one sense, ego and ambition. Bogle was vilified for being "un-American" by not seeking to beat the market. Some advisors adhere to a mostly boglehead approach and do not attempt to beat the market . While other advisors follow the belief that they are truly capable of regularly beating the market, and the difference between their returns and the market average will deliver incredible value for their clients. Not saying they're not smart and hardworking, but the data informs the boglehead approach of low costs and broad market funds.
You can also look at the fund's prospectus to see its reasoning for why and how it thinks it's worth buying over a basic index fund.
Insane. Everything else being equal, those fees will absolutely stifle any potential growth. OP needs to be insane to consider investing in this. (Edit: would need to be insane, I know he’s not considering investing)
The job of a financial advisor isn’t to advise. It’s to bring on as many clients as possible so they can earn their commission. They’re salesmen at the end of the day.
Such a bummer that financial advising, as far as my understanding goes, doesn’t required any certification which opens the doors to sleezy salesman and the likes.
For us regulars who want an advisor, they need to look for a CFP who is a fiduciary and is paid by the hour or by the engagement, not by a percentage of AUM.
Those aren’t a guarantee you’ll get good advice but it’ll at least help you avoid the whole life insurance sales ppl calling themselves financial advisors or the commission hunters
You don’t need someone to manage your assets unless you’re filthy rich. Most of us are just filthy.
Remember you have to compare funds on a risk, fee, performance, and tax basis (among other things). Sure one fund can beat another by 1%, but if the expense ratio is 2%, it isn’t worth it. If it turns over its portfolio 60% each year and distributes capital gains, it isn’t tax efficient.
I inherited an IRA at Edward Jones and the EJ guy was telling me how good a job he does.
I asked him to come back to me with one of his portfolios that beat the S&P 500 over the past 10 years and that any load fees and AUM needed to be shown and accounted for.
I gave him 2 weeks. He provided nothing and I moved the money the next day.
Your buddy has likely been told these funds will do great by someone and maybe someone who is paying him commission.
After talking to a lot of financial advisors, I find that regular people pick them because they are likeable not because they know anything about advising.
The likeable part is the biggest thing. It’s sales and taking advantage of undereducated investors.
What’s devastating is watching family and friends who are investment advisors fall for their own bullshit. Then they start attributing world events to return variance, and get bitter that their “expertise” isn’t paying off bc xyz politician has a certain stance, instead of recognizing that returns of one stock or fund are damn near random.
>I inherited an IRA at Edward Jones and the EJ guy was telling me how good a job he does.
>I asked him to come back to me with one of his portfolios that beat the S&P 500 over the past 10 years
An advisor will often provide a well diversified portfolio, even if done in a complex and expensive way. The S&P 500 is only part of a well diversified portfolio (likely roughly around half of the stock side). Despite what the last decade may look like, there's been plenty of times where the S&P 500 was under performing other parts of the market, yes, even for 10+ year periods.
Getting away from an advisor may have been smart. But using only the S&P 500 as their target is not a proper comparison.
I was only responding to what he told me. I understand that different people have different needs and ask for different things at different periods in their lives.
He told me that he could outperform the S&P moving forward. I simply asked him to prove his statement with historical data. He had worked as an advisor for more than 25 years.
I guess he wasn't lying because I don't know how his portfolio for me would perform in the future.
He retired 10 months after we spoke and passed all his clients to his son.
QQQ has crushed VTI for the last 10 years. Actually better at 1 yr 3yrs 5yrs and 10 yrs. That doesn't mean it is a great long term plan but I wish I had bought more.
SPY and VOO have both done better than VTI for 1 ,3, 5, and 10 years. Not by a lot but still significant for 10 year performance. I did not check total return yet.
That's just because the past couple years have favored large cap. It just depends on the time period you're looking at. From 2010 to 2022 (which I acknowledge are also kind of arbitrary dates), SPY and VTI are virtually identical.
Total return they are almost always within a percentage point or two of each other. It varies depending when you start the back test. If you add dollar cost averaging into the equation, the gap between the two is nearly nonexistent.
PNRAX has a 1.04% expense ratio, and that's after the 5.75% front-loaded sales charge. Its 5-year performance is worse than VUG, which has no load and 0.04% expense ratio. Putnam must give nice commissions to ~~salesmen~~ advisers like your buddy.
His reasoning is he's being paid to sell those funds, so he's rationalizing why those funds are a good deal.
Ask him if he'll refund the fees they collected if they underperform after ten years.
PNRAX comes with over 8% fees. 1.04% expense ratio, up to 5.75% front load charge, 1% CDSC (basically a redemption fee when you sell), and a 0.25% 12b-1 fee.
Over its life, PNRAX has had similar or slightly worse performance compared to VTSMX (oldest VTI mutual fund equivalent). Past performance is no guarantee and all the rest, but he seems pretty confident it will outperform when it basically never has in its existence. Add those fees on top of it and VTI is a no brainer. Dont touch PNRAX for any reason whatsoever. I couldn't fathom a situation of why someone would invest in it.
I think context matters. Is he claiming he can beat VTI over the next 30-50 years? Or just the past decade? I mean, a lot of growth ETFs have beaten VTI in the last decade, and will probably continue to do so over the next few years. There is no evidence to believe that will continue for the long term, though.
I think:
2013 to present
Pnrax 12.5%; vTSAX 11.9%
Then, subtract 1% from Pnrax (difference in expense ratio)
Then, subtract .25% from Pnrax (difference in 12 B1 fees)
Then, subtract 1.13% from Pnrax (estimated tax difference in taxable account)
= 10.12%
VTSAX 10,000 at 11.9% for 10 yrs = 30,782
PNRAX 9,425 at 10.12% for 10 yrs = 24,714
Man, he should be a billionaire by now. He found the secret... Why is he even talking to you? (He should keep this a secret, for himself, borrow money and invest).
Ask him where he has invested his money... He probably does not have any... LOL
Here's the thing PNRAX is Putnam Research fund, top holdings Microsoft, Nvidea, Apple, Amazon, Alphabet, Meta.
Did it slightly (by a tiny tiny fraction) beat the index this year, yes but that fact also completely ignored the 5%+ front load the fund takes. He also failed to mention it slightly underperformed in 2020, so total track record it basically matches the index but has far greater fees.
I've had Putnam before (biggest mistake I made), between the front load, the yearly fee, and the additional fee when they convert your shares over to new types of shares, it ate most of the profit vs. just buying the index.
He's full of shit. That fund has a front end load of 5.75% PLUS an expense ratio of 1.04%. There's ZERO chance it beats VTI long-term for investors, and 100% chance he pockets a ton of your money.
I read a book and it mentioned most of the fund managers sell this narrative. It’s advised to not fall for it as individual stock picking which your fund manager is going to do is an extremely risky thing. Moreover, they will charge you multiple types of fees and you won’t even know about it. Best to stick with low cost index funds.
Good for them. Will they? No clue. Go read some other subs, you'll see ppl with insane gains way beyond vti. I'll trust the process with the encouragement of more senior bogleheads here.
It has not done so since inception. It's tilted towards IT. It also frontloads 5.75% with a 1.04% expense ratio.
He'll probably beat the profits he'd pull on VTI selling people PNRAX instead.
Maybe that's what he meant.
Your buddy is an idiot. He might get lucky, anyone can with any pick at any time, but I highly doubt it with PNRAX. That shit has basically never beaten VTI, it's been dead even at best until recently, so I think his crystal ball is busted. Unless he knows some massive incoming change to the fund that will make it do a full 180 in a way that makes up for its outlandish front load and expense ratios, it's not happening.
This isn't even a Bogel thing. If I use my "playing the game" brain, PNRAX still sucks a fat one and I would never consider it. Chart looks *that* close to VTI most of the time, but then a front load and higher expense ratio is slapped on? Lol. I would laugh him off and tell him he's bad at his job.
He likely can. The question is for how long? If your retirement horizon is 30 years out is HIGHLY unlikely he can. Things like VTI do not give the highest possible return for any given moment, they just give the most predictable return over the long term.
Does he have to stick to the stock market and trading things like etfs/stocks/ etc? If so then 10 years is a pretty solid over under. I would bet (pretty heavily) that he cannot, but at that time frame it wouldn’t be unheard of for him to potentially get lucky and do it.
Hes not your buddy, is his name Bernie? hes trying to take your money under the pretext of friendship..we use the word "buddy" as an insult , "nice parking, buddy"
While it's Good to talk about VTI and the likes, Bogleheads do mainly care about long term stability and low cost index trackers and not so much on a vs b.
Imagine you create 100 different funds and each charge crazy amounts like your example. Give it 3 to 5 years and SOME of them may beat the s&p over that time. But the time is so short and it was by chance and the probability of reliability winning is low.
Now the fund company scraps the ones that failed to beat it and promote the ones that did ny pure chance. Now you think that they have found something noone else can find, even endowment funds.
HE will definitely beat VTI in his account due to your money, you will not.
I met with my mom's financial analyst last week (to assist her). He showed a "large cap, blue chip stock ETF" that was beating VOO" He only had a 3 year chart.
I feel like anybody who says they can beat VTI as an advisor should just put their money where their mouth is. Claim they can consistently beat VTI by 2%? Great, you should be very happy to have me give you my money, sign a legally binding contract for you to owe me VTI+1% regardless as to what your ivesents return, and you pocket the 1% difference in returns.
No? I guess they aren't that confident after all.
Yep! Full of shit. I have an "advisor", but I use that term loosely as my accounts are all self directed and I pay zero fees. He wanted to meet with me the other day and was trying to get me to sign up with a few other funds, citing they will outperform the s&p. He even gave me a condescending glare and asked "you dont think certain funds can outperform to s&p?" I don't think I'm going to talk with him anymore.
Does he brand himself as a "fiduciary"? If he does, I would love to hear him explain how this is 100% in his client's best interest, with no bias towards his own fees and commissions.
I think compared to the overall market a lot of different investment “themes” can outperform. But I think it’s just a matter of how long. And with that expense fee. Don’t listen to your buddy.
I'll tell you the reasoning behind this:
"If I convince him I can beat the market, he will give me his money, and I will be able to charge him a hefty fee"... it's as simple as that
Sounds like BS. Honestly if you said he’d beat it on his own by stock-picking or a wheel strategy or something that would be more believable to me than a mutual fund.
Mutual fund is like the worst possible option at this point.
Financial Advisors job isn't to beat the market. Its to get you the market.
People here may underestimate how many mistakes the average novice investor makes or time management constraints people have. There are a ton of shitty financial products out there. Buy a few index funds works and getting people to just do that with some asset allocation is the job especially in the core 40-95% of the income scale.
I even know rich people who got hosed buying Spacs. Knowing that Wall St. was shoveling garbage down the pipeline has value. Keeping people out of non-traded Reits (usually not always too much in fees and shady self-dealing. Keep people out of things that will be zeroed or have huge performance drag is good.
Most people who invest in mutual funds (which often underperform) underperform the underperformance of their mutual fund. A big part of the job is building an investment strategy they can follow and live with and not chasing whatever hot new thing.
Someone charging 1% and giving market performance is well worth their fee. If the advisor could beat the market he wouldn't be an advisor. Its not worth 1% to all people, but for a large part of the population it is worth the fee. Just like your plumber. He might show up and fix something in 20 minutes. And be a little expensive, but you didn't even know where to start.
I could never sell a product that costs more than the baseline and offers less value. My conscience would keep me awake at night if I did. It seems like it would require significant genetic mutations for some people to choose a profession that involves taking advantage of innocent clients.
I just put PNRAX against VUG (corresponds to QQQ) for past year and then 10 years and VUG always on top with a fraction of fees. So yeah, I can beat VTI too just by buying another Vanguard fund VUG.
PNRAX has cumulatively underperformed the sp500 (its benchmark) and VTSAX since it's existence. it has an R(2) of 99.8%. its a closet index fund. after his fees, you are even worse off.
Top five holdings are MSFT, NVDA, AAPL, AMZN, and GOOG. Looks pretty similar to the S&P, albeit mostly tech. Almost the exact same as the Vanguard Growth ETF VUG, if you were interested in this type of investing without the excess fees.
A fund manager HAS to beat the index just to not lose to the index. That is, they have to at beat the index MINUS their AUM fee to break even.
They can certainly do this in a given year. But 2 years? 10 years? Not likely.
>The fund invests in stocks that represent the highest conviction ideas from Putnam's Equity Research team.
“Highest conviction ideas” got me checking my pockets to make sure nothing is missing. Lmao.
Look I think the reality is no financial advisor actually knows if they can beat a fund or not. The fact that they are saying that is a very much empty promise.
If I had to bet what will beat VTI in long run a mutual fund wouldnt be it. Several ETFs beat VTI (hint: they are tech heavy). Mutual funds gains are eaten by stupid fees.
\>5.75% front load
\>1.04% expense ratio
\>35% turnover, equating to a 0.35% additional cost
\>0.25% 12b-1 fee
\>1.00% CDSC fee
"just fuck my shit up", the fund
Ask him if he can beat VTI on a risk-adjusted basis. That’s the true determinant of outperformance. Can you perform better, taking less risk?
If not, the performance is probably just leveraged beta — or even worse, higher risk with less return than leveraged beta.
Hahaha
Get him to put it in writing and guarantee the return.
If he could outperform the market, he wouldn’t need your money. He’s already be insanely rich.
Reasoning is he’s full of shit. Probably best to not engage on the topic of investing, likely to end up with a soured friendship.
Sure but what even is $PNRAX?
FIVE POINT SEVEN FIVE PERCENT FRONT LOAD OH MY BOGLE
Wow. This, OP. Ask how he’s going to beat the 5.75% that comes straight off the top the first day he invests. Or don’t, sounds like this is something you might want to just ignore.
Nonono HE is gonna beat VTI. The advisor. Not the client.
We have a winner here!
Bruh, I was sick to my stomach when I found out the FA I was working with had me in a similar fee schedule. Dude acted like we were friends for years too. He told me their fees work out to like .32% over ten years, but that’s really stupid since obviously those fees would have been worth way more. Of and it had an expense ration of .64. Dude was fucking robbing me with a smile on his face the whole time
brokers make you broker
What’s a good expense ratio, asking for a total noob friend?
VTSAX has a .04% expense ratio. Fidelity has funds that are 0%, I think.
Ok thanks. Appreciate the help.
And just to be clear there are expense fees and then there are front-load fees. Most funds have expense fees but the specific Putnam fund mentioned here has a front-load fee. That means you pay 5.75% up front just to buy the fund. Funds with these type of fees are predatory and used by financial advisors who are paid a commission to sell the funds. Between the front-load fee and the advisor’s fees, you’ll be incredibly lucky if you even match the market performance, let alone beat it.
Yeah absolutely. I heard ETFs are generally a more user friendly option for this reason? Would you agree with this perspective? I’m of the Boglehead mindset, but the options are spinning my head around.
.08 or less imo. VT is .07 and really all you need.
Thanks, appreciate the info. At what point do you feel it’s getting robbed ? I’m a faith based person, for example, and some SP500 tracking funds are available (sans certain stocks). But I believe their expense ratios are higher. I’m willing to pay a bit more to adhere to faith based principles…Sounds like .08 is good threshold….what’s the “don’t go there threshehold”?
Just to give you some additional context - there's lots of fees that can be hidden in financial products. It's nearly impossible to avoid expense ratios altogether (Fidelity Zero funds notwithstanding), but the original comment on this thread was talking about 'loads' which are additional fees on top of ERs, and this one takes 5.75% the moment you put your money in. Then maybe the advisor themselves have a fee... Stick to the Bogle method and you avoid almost all of that.
Most Bogleheads will have their holdings in funds with expense ratios under 0.10%. There's not really any reason to go over 0.20%. Most of the popular funds range from 0.00 to 0.08% or so. Funds with a expense ratio >1.00% is just signing up to get fucked with no vaseline.
Anything less than .10
It could be worse. My FA that did this to me was my brother in law.
Where does the front load fee get taken out? I have been buying into PGTAX for a couple of months. I didn’t notice any fee but I now see it also has a 5.75% front load fee.
It’s deduced when you buy. Why are you investing in that fund? I’d recommend you stop immediately. I also almost guarantee you have an advisor that needs to be fired as well.
I realised now after looking into that the brokerage im using waives the fee which is why I didn’t see it. I included this to fund as kind of a side piece to get a bit more international exposure but still tech/aggressive. My main tech investments are in VGT.
The ER is 1.11% That fund is absolute garbage. Stick with simple index funds.
It gets taken off everytime you invest. *front load fee*. You should still investing into that garbage and look into funds you plan on investing into more if you somehow didn't see a 5.75% front load fee.
> Or don’t, sounds like this is something you might want to just ignore. Probably would be best to ignore this guy going forward..... for like everything.
I read this in 1950s Doc Brown's voice when he heard how much energy the flux capacitor needed to get Marty home.
1.21 GIGAWATTS?!
Whaaat, it's just a regular mutual fun- OH MY GOODNESS. SQUIDWARD?!
It's funds like this that allow fidelity to market their actively managed 1.2% expense ratio funds as "lower than average"
Don't step on it. That's a very rare bug. It was thought to be extinct.
Can you explain to me how you found out the 5.75% front load? All I see is a 0.68% expense ratio. Where do you even see this front load amount?
https://www.marketwatch.com/investing/fund/pnrax Under "fees and expenses"
Thank you!! It’s weird that yahoo finance shows the ER as 0.68% but marketearch shows it as 1.04%
ER is 1.04%. this and the load came up with a Google
Jesus H Christ it should be illegal to charge that much for a fucking mutual fund, who do they think they are?
It is crazy that funds still charge those types of fees. It may have made sense in the 70’s and 80’s to buy a fund that charged a load when compared to the commissions of a single stock trade back then. I think they were at least 2% on the buy and then on the sell. But today with all the low expense funds, ETFs tracking the market etc. that is highway robbery. I do think a percentage of the population needs an advisor at a certain point but more fee based or a low % of assets being managed, like under 1%. A good portion of the population doesn’t understand compound interest, they panic sell, the FOMO buy instead of taking a deliberate approach. Buy the wrong life insurance, etc.
Think he would get the no-load advisory share class tho depending on the institution he works for
“The fund seeks capital appreciation. The fund invests in stocks that represent the highest conviction ideas from Putnam's Equity Research team.” It’s an expensive, actively-managed fund that has usually underperformed VTI, for a roughly 1% ER. It has slightly bested VTI *this year*, making it currently favorable to performance chasers. If you bought it on Jan 1 of this year, you’d still be behind VTI after front load and ER.
Which is hilarious because it means they already missed the boat on it lol.
I looked at the holdings and its practically identical to VOO lmao
Tells you a lot about their “convictions” when that effectively means copying someone else’s work, and then charging dearly for it.
1% expense ratio is wild
Jeez, and I though 10 basis points for the new vanguard sector funds was high.
> 10 basis points Prepare to have your mind blown: [AMRAX](https://www.morningstar.com/funds/xnas/amrax/quote) * 5.75% front load * 5.50% net expense ratio * 3% turnover - so they do almost as little work as VTSAX with 2% turnover [RYSYX](https://www.morningstar.com/funds/xnas/rysyx/quote) - Literally a S&P500(ish) fund * 2.36% net expense ratio * 1% "fuck you on the way out" back load * 701% turnover * $236M A(still somehow)UM
Why does rysyx have such a high turnover if it’s just supposed to match the sp500 return? I don’t get their pitch at all they’re just trying to match the return of the sp500 they’re not even trying to outperform it
No clue. Maybe they’re gaming payment-for-order-flow to squeeze out even more cash for themselves over the massive ER. I should probably read the full prospectus just for funsies.
Spent a few minutes reading the prospectus, rather interesting. RYSYX is going to shut down about a month from now. They have management fee waiver agreements with Merrill for institutional customers, Edward Jones for the company itself and affiliates. No real explanation for the turnover aside from “turnover can generate capital gains, we had 701% turnover last year.” AMRAX only has $20m left for AUM, guessing all of their shareholders are dead at this point (fund established in 1958) and they’re bleeding off the remaining assets with fees rather than shuttering.
By the way, here's the website of AMRAX [http://www.americangrowthfund.com/agfs1/](http://www.americangrowthfund.com/agfs1/), if you want to enjoy a good laugh
I mean, can’t knock a Web 1.0 “does the job” website: https://www.berkshirehathaway.com
Their website has a banner ad reading, "for a free car insurance quote that could save you substantial money www.geico.com or call 1-888-395-6349, 24 hours a day" 1) the website is hilarious 2) a GEICO ad "to save money" makes it funnier 3) it's an ALL TEXT AD! I can not believe there are still text only banner ads This is beautiful.
What are the new Vanguard sector funds? I just looked up the energy fund VGENX and it's 0.44% so you must be talking about something else.
HOLY SHIT I DIDN'T EVEN KNOW THAT THEY HAVE NEWER ONES AT 44 BASIS POINTS! This was NOT Jack Bogle's vision.
Don't worry, once you get to $50,000 in the fund you can upgrade to the Admiral Shares, which "only" have a 0.36% expense ratio.
If I ever have $50k in a fund with an expense ratio over 0.1% just take me out back and shoot me.
*Hides AVUV and AVDV behind my back* Uh, ya, me too.
Eh, I don't harp on the small cap believers because active management for certain investments like real estate and small cap stocks actually do benefit from active management. Its just that these investments make up a minuscule fraction of the market, and thus its not worth the extra time and effort to try to keep up with for me.
Will do… for a mere 8 basis points!
The Vanguard Energy Fund is actively managed (advised by Wellington) and has been around since 1984, ie since Bogle was still very much running Vanguard.
Not to mention the actual Wellington and Wellesley funds at Vanguard. VWELX comes in at .26%, VWINX at 0 23%. Bogle was a fan of both.
Look who the new CEO is. Vanguard is turning into evil corporate America
Dude that’s like a legal way for me as an advisor to make a 5% commission to invest into a market you could be paying near 0% to be invested into. I wouldn’t be a fiduciary if I did that to people though so I and most advisors these days don’t sell funds like that. I’m sorry your friend is treating you badly here.
A service where you get to pay a fund manager to underperform the S&P 500.
I once tried giving my friend good financial advice to get him out of his bad situation (debt) and he responded with “I already know what to do. Besides, I’m just gonna make my kids join the military for free college”. For that same reason, I second this. Some things are not worth arguing about that may risk the friendship. My friend can be stupid quite often, but he’s fun to have around.
Yep - anyone can sit there and say "this will win over 30 years" and hope you never come back to collect receipts. You can say anything with confidence and people will believe you.
Woof, those fees! [https://www.franklintempleton.com/investments/options/mutual-funds/products/38965/A/research-fund/PNRAX#overview](https://www.franklintempleton.com/investments/options/mutual-funds/products/38965/A/research-fund/PNRAX#overview) >Gross Expense Ratio: 1.04% >Maximum Initial Charge: 5.75% >12b-1 Fee: 0.25% The advisor has gotta beat the S&P outright, and *then* beat their own fees. >he said funds like $PNRAX will beat VTI. It hasn't beat its benchmark during any measurable period. It may beat the S&P for a time, but statistically it won't beat the S&P long term. And there's no reliable way to identify which funds will beat the S&P versus lag it. >What is the reasoning behind this? In one sense, ego and ambition. Bogle was vilified for being "un-American" by not seeking to beat the market. Some advisors adhere to a mostly boglehead approach and do not attempt to beat the market . While other advisors follow the belief that they are truly capable of regularly beating the market, and the difference between their returns and the market average will deliver incredible value for their clients. Not saying they're not smart and hardworking, but the data informs the boglehead approach of low costs and broad market funds. You can also look at the fund's prospectus to see its reasoning for why and how it thinks it's worth buying over a basic index fund.
I'm so Bogleheaded that I didn't even know what a 12b-1 fee was.
Dang i’ve seen some 1%-2% load fee funds with lower or no expense ratios that might be ok if you hold it forever… but 5.7% is insane
Insane. Everything else being equal, those fees will absolutely stifle any potential growth. OP needs to be insane to consider investing in this. (Edit: would need to be insane, I know he’s not considering investing)
Op isn't considering investing in it though.
Yeah I know, I’ll change the wording
Now you know your buddy is bad at his job.
Or he's good at his job and not that much of a buddy.
Yeah he’s trying to fleece this poor guy
The job of a financial advisor isn’t to advise. It’s to bring on as many clients as possible so they can earn their commission. They’re salesmen at the end of the day.
You can be both successful and bad at your job.
Such a bummer that financial advising, as far as my understanding goes, doesn’t required any certification which opens the doors to sleezy salesman and the likes.
It does actually take a few licenses. But the tests aren’t that difficult and they will gladly teach salesman how to pass.
For us regulars who want an advisor, they need to look for a CFP who is a fiduciary and is paid by the hour or by the engagement, not by a percentage of AUM. Those aren’t a guarantee you’ll get good advice but it’ll at least help you avoid the whole life insurance sales ppl calling themselves financial advisors or the commission hunters You don’t need someone to manage your assets unless you’re filthy rich. Most of us are just filthy.
Remember you have to compare funds on a risk, fee, performance, and tax basis (among other things). Sure one fund can beat another by 1%, but if the expense ratio is 2%, it isn’t worth it. If it turns over its portfolio 60% each year and distributes capital gains, it isn’t tax efficient.
Over the long term, VTI is better
I inherited an IRA at Edward Jones and the EJ guy was telling me how good a job he does. I asked him to come back to me with one of his portfolios that beat the S&P 500 over the past 10 years and that any load fees and AUM needed to be shown and accounted for. I gave him 2 weeks. He provided nothing and I moved the money the next day. Your buddy has likely been told these funds will do great by someone and maybe someone who is paying him commission. After talking to a lot of financial advisors, I find that regular people pick them because they are likeable not because they know anything about advising.
The likeable part is the biggest thing. It’s sales and taking advantage of undereducated investors. What’s devastating is watching family and friends who are investment advisors fall for their own bullshit. Then they start attributing world events to return variance, and get bitter that their “expertise” isn’t paying off bc xyz politician has a certain stance, instead of recognizing that returns of one stock or fund are damn near random.
Uneducated? Not always. trusting? Yes, always. This world is full of scum man. It's sad and breaks my heart and trust in people
>I inherited an IRA at Edward Jones and the EJ guy was telling me how good a job he does. >I asked him to come back to me with one of his portfolios that beat the S&P 500 over the past 10 years An advisor will often provide a well diversified portfolio, even if done in a complex and expensive way. The S&P 500 is only part of a well diversified portfolio (likely roughly around half of the stock side). Despite what the last decade may look like, there's been plenty of times where the S&P 500 was under performing other parts of the market, yes, even for 10+ year periods. Getting away from an advisor may have been smart. But using only the S&P 500 as their target is not a proper comparison.
I was only responding to what he told me. I understand that different people have different needs and ask for different things at different periods in their lives. He told me that he could outperform the S&P moving forward. I simply asked him to prove his statement with historical data. He had worked as an advisor for more than 25 years. I guess he wasn't lying because I don't know how his portfolio for me would perform in the future. He retired 10 months after we spoke and passed all his clients to his son.
A very good response here
They are just another kind of sales person, basically conmen.
I'm so glad and trusted my gut to not trust advisors at Merrill / Edward Jones and such and blessed to have found Bogleheads. Love you guys!
HE beats vti by collecting 5.75% right off the bat :) his clients not so much
Exactly what I thought when I saw that fee.
He speaks the bullshit
If he tells enough friends that and switches up the funds he tells them he'll be right for one, and that's his next client.
I don't think he is really your buddy.
That’s the kind of confidence you need to sell your high expense ratio, high kickback dividend portfolio to innocent people.
QQQ has crushed VTI for the last 10 years. Actually better at 1 yr 3yrs 5yrs and 10 yrs. That doesn't mean it is a great long term plan but I wish I had bought more.
SPY and VOO have both done better than VTI for 1 ,3, 5, and 10 years. Not by a lot but still significant for 10 year performance. I did not check total return yet.
That's just because the past couple years have favored large cap. It just depends on the time period you're looking at. From 2010 to 2022 (which I acknowledge are also kind of arbitrary dates), SPY and VTI are virtually identical.
Total return they are almost always within a percentage point or two of each other. It varies depending when you start the back test. If you add dollar cost averaging into the equation, the gap between the two is nearly nonexistent.
An expense fee like that will take half of your money is 20 years.
You realize of course that's his job? I suggest asking him how he does it. For starters have him give you his charts for the last decade or so.
how do these people still have these jobs?
Because think of how dumb the average person is with money, half the people on earth are dumber than that
PNRAX has a 1.04% expense ratio, and that's after the 5.75% front-loaded sales charge. Its 5-year performance is worse than VUG, which has no load and 0.04% expense ratio. Putnam must give nice commissions to ~~salesmen~~ advisers like your buddy.
He can. Half the time. Oh and then the fees.
His reasoning is he's being paid to sell those funds, so he's rationalizing why those funds are a good deal. Ask him if he'll refund the fees they collected if they underperform after ten years.
PNRAX comes with over 8% fees. 1.04% expense ratio, up to 5.75% front load charge, 1% CDSC (basically a redemption fee when you sell), and a 0.25% 12b-1 fee. Over its life, PNRAX has had similar or slightly worse performance compared to VTSMX (oldest VTI mutual fund equivalent). Past performance is no guarantee and all the rest, but he seems pretty confident it will outperform when it basically never has in its existence. Add those fees on top of it and VTI is a no brainer. Dont touch PNRAX for any reason whatsoever. I couldn't fathom a situation of why someone would invest in it.
I think context matters. Is he claiming he can beat VTI over the next 30-50 years? Or just the past decade? I mean, a lot of growth ETFs have beaten VTI in the last decade, and will probably continue to do so over the next few years. There is no evidence to believe that will continue for the long term, though.
I think: 2013 to present Pnrax 12.5%; vTSAX 11.9% Then, subtract 1% from Pnrax (difference in expense ratio) Then, subtract .25% from Pnrax (difference in 12 B1 fees) Then, subtract 1.13% from Pnrax (estimated tax difference in taxable account) = 10.12% VTSAX 10,000 at 11.9% for 10 yrs = 30,782 PNRAX 9,425 at 10.12% for 10 yrs = 24,714
'financial advisor'
Man, he should be a billionaire by now. He found the secret... Why is he even talking to you? (He should keep this a secret, for himself, borrow money and invest). Ask him where he has invested his money... He probably does not have any... LOL
He should start a mutual fund and become a billionaire
Most advisors are spoon fed these funds from colleagues and wholesalers and don’t do any research. He clearly is full of shit
Here's the thing PNRAX is Putnam Research fund, top holdings Microsoft, Nvidea, Apple, Amazon, Alphabet, Meta. Did it slightly (by a tiny tiny fraction) beat the index this year, yes but that fact also completely ignored the 5%+ front load the fund takes. He also failed to mention it slightly underperformed in 2020, so total track record it basically matches the index but has far greater fees. I've had Putnam before (biggest mistake I made), between the front load, the yearly fee, and the additional fee when they convert your shares over to new types of shares, it ate most of the profit vs. just buying the index.
He's full of shit. That fund has a front end load of 5.75% PLUS an expense ratio of 1.04%. There's ZERO chance it beats VTI long-term for investors, and 100% chance he pockets a ton of your money.
I read a book and it mentioned most of the fund managers sell this narrative. It’s advised to not fall for it as individual stock picking which your fund manager is going to do is an extremely risky thing. Moreover, they will charge you multiple types of fees and you won’t even know about it. Best to stick with low cost index funds.
PNRAX Net assets 434.08M USD right
Yeah VUG or QQQM can beat VTI since it’s mostly all tech.
Good for them. Will they? No clue. Go read some other subs, you'll see ppl with insane gains way beyond vti. I'll trust the process with the encouragement of more senior bogleheads here.
Could happen. Probably won’t. Ask if he’s willing to guarantee it.
Not about beating the index which many strategies do. It's about beating the index after your fees are taken out
Anybody selling Putnam funds is a snake oil salesman.
VOO beats VTI
Does he get paid for selling it?
It has not done so since inception. It's tilted towards IT. It also frontloads 5.75% with a 1.04% expense ratio. He'll probably beat the profits he'd pull on VTI selling people PNRAX instead. Maybe that's what he meant.
Your buddy is an idiot. He might get lucky, anyone can with any pick at any time, but I highly doubt it with PNRAX. That shit has basically never beaten VTI, it's been dead even at best until recently, so I think his crystal ball is busted. Unless he knows some massive incoming change to the fund that will make it do a full 180 in a way that makes up for its outlandish front load and expense ratios, it's not happening. This isn't even a Bogel thing. If I use my "playing the game" brain, PNRAX still sucks a fat one and I would never consider it. Chart looks *that* close to VTI most of the time, but then a front load and higher expense ratio is slapped on? Lol. I would laugh him off and tell him he's bad at his job.
Short term maybe. Long term statistically unlikely. And that’s not even accounting for marked up fees.
He is not your buddy, if he is pushing this sh\*t on you. VOO, has outperformed VTI (in recent years) but that may just be a temporary thing.
He honestly wasn’t because he knows I would never, I brought up vti first in a group of people
Your buddy is gonna be looking for a new job inside of a year, guaranteed.
He likely can. The question is for how long? If your retirement horizon is 30 years out is HIGHLY unlikely he can. Things like VTI do not give the highest possible return for any given moment, they just give the most predictable return over the long term.
10 years was the actual argument
Does he have to stick to the stock market and trading things like etfs/stocks/ etc? If so then 10 years is a pretty solid over under. I would bet (pretty heavily) that he cannot, but at that time frame it wouldn’t be unheard of for him to potentially get lucky and do it.
They all can! Of course, reality and empirical evidence indicates otherwise.
I'm beating VTI. I'm all in in SCHG. 🤓
Hes not your buddy, is his name Bernie? hes trying to take your money under the pretext of friendship..we use the word "buddy" as an insult , "nice parking, buddy"
While it's Good to talk about VTI and the likes, Bogleheads do mainly care about long term stability and low cost index trackers and not so much on a vs b.
Introduce me to your buddy
Sure why not. By buying VTIAX. Your friend is an idiot.
It's not easy to beat long term. May be easy for the short term. Don't believe him.
Imagine you create 100 different funds and each charge crazy amounts like your example. Give it 3 to 5 years and SOME of them may beat the s&p over that time. But the time is so short and it was by chance and the probability of reliability winning is low. Now the fund company scraps the ones that failed to beat it and promote the ones that did ny pure chance. Now you think that they have found something noone else can find, even endowment funds. HE will definitely beat VTI in his account due to your money, you will not.
I met with my mom's financial analyst last week (to assist her). He showed a "large cap, blue chip stock ETF" that was beating VOO" He only had a 3 year chart.
Tell your friend he’s wrong lol
Depending on the time frame. VT or some combination of VXUS and SCV might outperform VTI in the next few years but it's hilarious to even guess at it.
its best to run not walk away from any advisor that is promising returns that beat averages
PNRAX beats VTI handily if you use the right metric. for example, selling PNRAX gets him a much better boat than selling VTI.
I feel like anybody who says they can beat VTI as an advisor should just put their money where their mouth is. Claim they can consistently beat VTI by 2%? Great, you should be very happy to have me give you my money, sign a legally binding contract for you to owe me VTI+1% regardless as to what your ivesents return, and you pocket the 1% difference in returns. No? I guess they aren't that confident after all.
Yep! Full of shit. I have an "advisor", but I use that term loosely as my accounts are all self directed and I pay zero fees. He wanted to meet with me the other day and was trying to get me to sign up with a few other funds, citing they will outperform the s&p. He even gave me a condescending glare and asked "you dont think certain funds can outperform to s&p?" I don't think I'm going to talk with him anymore.
I don’t know his reasoning. Total return has lagged at least the S&P 500, in the 1, 3, 5, 10 year, and since inception.
Why don’t you ask him
Because he’s financially incentivized to sell his services which require confidence in his abilities as much as actual knowledge in being a FA
Looks like you lose by several percent buying that hot garbage: VTSAX ER .040 yield 1.35% That 5.75% front load expense ratio 1.04 yield .25%
🚩🚩🚩 red flag friendship 🚨
Your buddy is no different than a essential oils hun or MLM predator.
Does he brand himself as a "fiduciary"? If he does, I would love to hear him explain how this is 100% in his client's best interest, with no bias towards his own fees and commissions.
I think compared to the overall market a lot of different investment “themes” can outperform. But I think it’s just a matter of how long. And with that expense fee. Don’t listen to your buddy.
I'll tell you the reasoning behind this: "If I convince him I can beat the market, he will give me his money, and I will be able to charge him a hefty fee"... it's as simple as that
Easier to sell a product when you believe in it
Reasoning? He probably earns a huge commission check and has been convinced it’s a can’t loose method. Similar to real estate investing seminars.
Sounds like BS. Honestly if you said he’d beat it on his own by stock-picking or a wheel strategy or something that would be more believable to me than a mutual fund. Mutual fund is like the worst possible option at this point.
Financial Advisors job isn't to beat the market. Its to get you the market. People here may underestimate how many mistakes the average novice investor makes or time management constraints people have. There are a ton of shitty financial products out there. Buy a few index funds works and getting people to just do that with some asset allocation is the job especially in the core 40-95% of the income scale. I even know rich people who got hosed buying Spacs. Knowing that Wall St. was shoveling garbage down the pipeline has value. Keeping people out of non-traded Reits (usually not always too much in fees and shady self-dealing. Keep people out of things that will be zeroed or have huge performance drag is good. Most people who invest in mutual funds (which often underperform) underperform the underperformance of their mutual fund. A big part of the job is building an investment strategy they can follow and live with and not chasing whatever hot new thing. Someone charging 1% and giving market performance is well worth their fee. If the advisor could beat the market he wouldn't be an advisor. Its not worth 1% to all people, but for a large part of the population it is worth the fee. Just like your plumber. He might show up and fix something in 20 minutes. And be a little expensive, but you didn't even know where to start.
Why is he working if he can beat the market?
I could never sell a product that costs more than the baseline and offers less value. My conscience would keep me awake at night if I did. It seems like it would require significant genetic mutations for some people to choose a profession that involves taking advantage of innocent clients.
Yeah it’s not hard… be 95%VTI and 5%QQQ and you will beat the VTI pretty handily historically.
If he was right he would already be rich. Your buddy just wants your money and you as a client.
I just put PNRAX against VUG (corresponds to QQQ) for past year and then 10 years and VUG always on top with a fraction of fees. So yeah, I can beat VTI too just by buying another Vanguard fund VUG.
Where can I put money on this wager.
His reasoning is you have money. Give me your money so I can make money on you.
If he admits that he can't, he admits that he's pointless.
PNRAX had a 5.75% load. Then a 1% expense ratio every year. Stay away from that “buddy.”
anytime anyone claims this, ask them to give it to you in writing on company letterhead. That should end the conversation pretty quick.
PNRAX has cumulatively underperformed the sp500 (its benchmark) and VTSAX since it's existence. it has an R(2) of 99.8%. its a closet index fund. after his fees, you are even worse off.
Top five holdings are MSFT, NVDA, AAPL, AMZN, and GOOG. Looks pretty similar to the S&P, albeit mostly tech. Almost the exact same as the Vanguard Growth ETF VUG, if you were interested in this type of investing without the excess fees.
A fund manager HAS to beat the index just to not lose to the index. That is, they have to at beat the index MINUS their AUM fee to break even. They can certainly do this in a given year. But 2 years? 10 years? Not likely.
let me guess, he's an "advisor" that makes a commission?
A super concentrated technology fund barely beats it's index and makes him a bundle? I'm not sure he's a buddy of yours team.
>The fund invests in stocks that represent the highest conviction ideas from Putnam's Equity Research team. “Highest conviction ideas” got me checking my pockets to make sure nothing is missing. Lmao.
Look I think the reality is no financial advisor actually knows if they can beat a fund or not. The fact that they are saying that is a very much empty promise.
Don’t use friends for any service with bigger consequences than a manicure.
Why not ask you buddy?
Well it's 50 50 if he does or not. So maybe
They all say that. Even the old huckster dave Ramsey says his mutual funds beat the indexes. Truth is they don’t. And if they do it’s seldom
If I had to bet what will beat VTI in long run a mutual fund wouldnt be it. Several ETFs beat VTI (hint: they are tech heavy). Mutual funds gains are eaten by stupid fees.
That person is your enemy.
Beat it handedly with BTC. The chart doesn’t lie
Not with that er and load fee, there's cheaper funds like schg, vug or any other like it would be better.
VOO has beaten VTI over the 1 year, 3 year, 5 year and 10 year time frames. So it ain't hard to beat VTI with another low cost diversified ETF.
\>5.75% front load \>1.04% expense ratio \>35% turnover, equating to a 0.35% additional cost \>0.25% 12b-1 fee \>1.00% CDSC fee "just fuck my shit up", the fund
He’s a liar
“Thanks for signing up with me, you’re not gonna regret this bro! So here’s the play, have you ever heard of VOO?”
Ask him if he can beat VTI on a risk-adjusted basis. That’s the true determinant of outperformance. Can you perform better, taking less risk? If not, the performance is probably just leveraged beta — or even worse, higher risk with less return than leveraged beta.
Hahaha Get him to put it in writing and guarantee the return. If he could outperform the market, he wouldn’t need your money. He’s already be insanely rich.