My Balanced Fund: Q3 2005 YTD review
Has my balanced fund continued to outperform a broadly diversified balanced index fund? What, if anything, am I giving up in tax efficiency for being in an actively managed vs. passively managed index fund?
For this post, I used Morningstar's "fund compare" tool to review YTD return and tax efficiency for my balanced fund. Vanguard's Balanced Index Fund (VBINX) results have also been included -- serving as my benchmark.
My fund
Dodge & Cox Balanced (DODBX) -- closed to new investors
Learn how to find more funds like D&C Balanced. Here are 10 reasons why I like my D&C fund.
The benchmark
Vanguard Balanced Index Fund (VBINX) has been used as the benchmark. According to Vanguard: "With 60% of its assets, the fund seeks to track the investment performance of a benchmark index that measures the investment return of the overall U.S. stock market. With 40% of its assets, the fund seeks to track the investment performance of a broad, market-weighted bond index."
Morningstar's results and my comments follow.
Return: My balanced fund compared with the benchmark
My comments
- My fund beat the benchmark for the first nine months of the year:
- - D&C Balanced = 4.41% YTD
- - The benchmark = 3.08 YTD
- For 1-year returns, D&C beat the benchmark by a good margin (12.89% vs. 9.80%)
- For 3-year returns, D&C beat the benchmark by a good margin (16.11% vs. 12.43%)
- For 5-year returns, D&C beat the benchmark by a very wide margin (11.45% vs. 2.50%)
Tax cost ratio: My balanced fund compared with the benchmark
My comments
- For the 3-year and 5-year tax cost ratio**, my fund has higher tax costs than does the benchmark. But for both time periods, my fund still outperformed -- by good margins -- the benchmark in total after tax return.
** Tax cost ratio represents the percentage-point reduction in an annualized return that results from income taxes. The calculation assumes investors pay the maximum federal rate on capital gains and ordinary income. A smaller number means LESS taxes.
Note: D&C also did very well in the Bear Market Performance Ranking, landing in the top 7 percentile (a smaller number means better performance in down markets). I highly value this quality in my D&C fund.
Caveat
- Over long periods of time, index funds have outperformed approximately 90% of managed funds. Long term investors should give strong consideration to index funds. Learn more about actively vs. passively managed funds by reading the index fund debate.
- The benchmark in this comparison represents a diversified balanced index. Investors may also choose to hold more narrowly focused index funds -- of which, some have outperformed the broad index.
Related links
- My Bond Fund: Q3 2005 YTD review
- My International Funds: Q3 2005 YTD review
- Don't miss this popular series: The index fund debate
- Learn how you may be able to lower costs when purchasing mutual funds
- See how my retirement plan withstands the test of time
about - feedback - disclaimer
• VirtualBank gives you up to 5.13% APY for your savings!
• Blue Cash from American Express: 5% Back on Gas, Up to 5% cash back on eligible purchases, No Annual Fee, 0% Introductory APR for 6 months, Pay over time
• Try Starwood Preferred Guest Credit Card from American Express. Great rewards and first year fee free!
• Bad Credit Home Loans
• Life Insurance in 10 minutes if qualified. No medical exam.
Just hit Morningstar to check 2005 annual returns for my four funds. As you are likely aware, last year's return for Dow Jones Industrials and even the broader S&P 500 were uninspiring; finishing down 0.6% and up 3% respectively. Vanguard's Total Int'l index was up ... Read
Has my bond fund continued to outperform a broadly diversified bond index? How is my fund doing when compared to individual bonds? What, if anything, am I giving up in tax efficiency for being in an actively managed vs. passively managed index fund? For this ... Read
Have my international funds continued to outperform a broadly diversified international stock index? What, if anything, am I giving up in tax efficiency for being in actively managed vs. passively managed index funds? For this post, I used Morningstar's "fund compare" tool to review YTD ... Read
I found a good tool for measuring mutual fund performance at www.Fasttrack.net. It also had info about strategies that I was questioning.
