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Yep this is the key difference between professional analysis and what most people are limited to. These returns are incredibly impressive with a small-cap bias and limited exposure to the mag7. Those who understand long-term market cyclicality and how PRIMECAP has generated alpha over time should be licking their chops at an opportunity like this. Those who invest based on the trailing 5 years have a very long history of horrible investment results.
@@FundamentalsofFinance explain what I am missing. I am relatively new to investing and appreciate you videos. But when I look at these comparisons they differ from your video? These show VOO having a better return?
Ok so reading more into this... So it is not about the trailing 5 years, but beyond that... and also it is a potential hedge for the overload of Tech in Voo that makes this attractive.
Partially. The last 5 years is not remotely predictive of future results. In fact, markets are cyclical, and the typical market cycle is around ~7yrs give or take, so more often then not the next 5 years looks very very different from the last 5 years. Judging just based on the past 1, 3, 5, and 10yr results is literally the #1 most common mistake investors make. I wouldn't say this is a hedge to tech, but what I would say is that the insane narrowly driven hype rally we've seen for tech/ AI the last 2 years has been the key reason VOO has been doing so much better recently and that's highly unlikely to continue in the long run imo. Better predictors for what will do well in the future are all the things I laid out in the video. They have a consistent process that has proven to work very well over time and consistently beat VOO over 97% of rolling 10 yr periods. Not 100%, including the last 10 years. 97%. But 97% is pretty high. I'll take those odds going forward, especially knowing that this fund has always gone against the grain and avoided the largest most popular stocks, which has been key to its long term success, and in the short-term that's been why it's trailed. Since I don't think the same 7 companies will dominate the market forever I don't think the short-term results are likely to repeat. Actually they're more likely to reverse at some point, like they always have, and that would likely benefit PRIMECAP. Think about investing like driving. You should have a set destination in mind and you should always be looking forward. Investing based only on short-term past returns is like driving while looking in the rear-view mirror... usually doesn't end well.
I think it's the process that sets them apart and they've already had key PMs retire over the past 10-15 years with basically no noticeable impact on their results. In this strategy I still feel confident on the long-run even though some of the PMs will inevitably be different eventually.
How are you arriving at the 97% figure? Just cumulative over the 40 years? It looks like around 1999 to 2001 was a period of extreme out performance but outside of that it largely tracks the S&P 500? If taking the performance comparison year to year it does not beat the S&P 500 as regularly as the title suggest? Just in the past 10 years S&P 500 has outperformed PRIMECAP 4 of the years. I am not sure where to get the data further back than 2014, the Vanguard website only seems to give to 2014. Curious if the 97% beating the S&P would maintain if those 2 years of outperformance where removed since it looks like it tracks the index the rest of the way (especially since the last 10 years it is just slightly below the index, indicating maybe earlier in fund life performance drives out-performance)? I really like your content by the way, wondering your thoughts on those years influence on the data? It does look like the fund has great potential and has not had as rough drawdowns as the S&P. Thank you again for putting out thoughtful content, so much of youtube finance is junk and I appreciate you putting out quality educational material.
Thank you! So that refers to rolling monthly 10 year periods over the lifetime of the fund. That means like 1/1/90-12/31/99, 2/1/90-1/31/99, etc. So, those 2 years actually don't have that big of an impact on the 97%, but they do have a decent impact on the magnitude of ever excess return. It's a bit disingenuous to cherry pick results to remove but just for fun, from inception to 12/31/98 it beat voo by 80bps/yr and from 1/31/01-9/30/24 it beat it by 143bps/yr. So, but 260+ but still much better before and after. Oh and Morningstar uses the Vanguard 500 mutual fund's results before the ETF came out. They consider the ETF basically a new share class of the same exact strategy. Another interesting note related to that time period is that it trailed VOO 3 of 4 years from '95-'98 since it largely avoids the largest, most popular, most expensive stocks. That's what led to such great results when they were proven right in the long run (tech bubble crash). Now they are behind over the last 3/5yr periods for largely the same reason... will they be proven right again? Time will tell but a few months ago we did a video about AI being in a bubble so I think they will be.
@@FundamentalsofFinance Thank you for the thorough and thoughtful reply! The added detail is very helpful! I appreciate you taking out what looks like a cherry picked era of out-performance and letting us know the result! I was curious as to why it seemed to do so well during that time period, but I am more impressed it seems to avoid the big draw downs or at least they don't seem as bad when tech corrects. - Keep up the solid educational work, the internet needs you! :)
It's an actively managed account. One that has destroyed thr legendary S&P 500 at that. Go look at the history of ER's and fees and also look into prices for ACTIVELY MANAGED funds. Particularly mutual funds that have anywhere near this level of performance over 40 years (good luck finding another to begin with). Hell, funds with dog crap performance relative to this that are actively managed often cost much more. So, next you ask how make sure you are comparing apples to apples. This isn't some robo advisor fund that just follows an index. That is damn cheap for an actively managed fund if it's calibur.
I literally put a long-term chart right at the beginning showing what i was referring to. 2 of them actually. If the most recent 5yr period was a good predictor of the future then everyone would be wildly rich from investing.
@@ophirmayer1You should be looking past 5 years anyhow btw. That's not a long term deal at all. This last 5 years has been like a bubble for AI. Not to mention had crazy stuff like covid and abnormal circumstances in general. Cherrypicking such a time like that is silly. He gave you like 30-40 years of data which is WAAAAAY more impressive. Gotta learn to compare funds intended for the long term to (both of these) to be compared by long term charts.
Not gonna lie, he may just convince me to move my funds BACK into Vanguard. I legit moved the vast majority of my funds there elsewhere (for a rather large bonus) in part due ti how behind the times they were with their applications, navigation, UI/UX, & navigation. A fund like this though is pretty incredible and I may have to go ahead and move some things around again since Vanguard is the only place to buy this one.
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Key characteristics
VPMCX VOO
YTD Return 16.16% 24.05%
1Y Return 29.74% 40.59%
3Y Return (Ann) 8.96% 10.54%
5Y Return (Ann) 14.84% 16.15%
10Y Return (Ann) 13.45% 13.61%
Sharpe Ratio 2.01 3.15
Sortino Ratio 2.71 4.17
Omega Ratio 1.37 1.58
Calmar Ratio 2.28 3.34
Martin Ratio 9.45 21.02
Ulcer Index 2.97% 1.85%
Daily Std Dev 13.94% 12.27%
Max Drawdown -81.07% -33.99%
Current Drawdown -2.47% -0.15%
Yep this is the key difference between professional analysis and what most people are limited to. These returns are incredibly impressive with a small-cap bias and limited exposure to the mag7. Those who understand long-term market cyclicality and how PRIMECAP has generated alpha over time should be licking their chops at an opportunity like this. Those who invest based on the trailing 5 years have a very long history of horrible investment results.
@@FundamentalsofFinance explain what I am missing. I am relatively new to investing and appreciate you videos. But when I look at these comparisons they differ from your video? These show VOO having a better return?
Ok so reading more into this... So it is not about the trailing 5 years, but beyond that... and also it is a potential hedge for the overload of Tech in Voo that makes this attractive.
Partially. The last 5 years is not remotely predictive of future results. In fact, markets are cyclical, and the typical market cycle is around ~7yrs give or take, so more often then not the next 5 years looks very very different from the last 5 years. Judging just based on the past 1, 3, 5, and 10yr results is literally the #1 most common mistake investors make.
I wouldn't say this is a hedge to tech, but what I would say is that the insane narrowly driven hype rally we've seen for tech/ AI the last 2 years has been the key reason VOO has been doing so much better recently and that's highly unlikely to continue in the long run imo.
Better predictors for what will do well in the future are all the things I laid out in the video. They have a consistent process that has proven to work very well over time and consistently beat VOO over 97% of rolling 10 yr periods. Not 100%, including the last 10 years. 97%. But 97% is pretty high. I'll take those odds going forward, especially knowing that this fund has always gone against the grain and avoided the largest most popular stocks, which has been key to its long term success, and in the short-term that's been why it's trailed. Since I don't think the same 7 companies will dominate the market forever I don't think the short-term results are likely to repeat. Actually they're more likely to reverse at some point, like they always have, and that would likely benefit PRIMECAP.
Think about investing like driving. You should have a set destination in mind and you should always be looking forward. Investing based only on short-term past returns is like driving while looking in the rear-view mirror... usually doesn't end well.
Thanks for the in depth video. What do you think as a lomg term buy (15 - 30 years) when the majority of the fund managers retire or pass away.
I think it's the process that sets them apart and they've already had key PMs retire over the past 10-15 years with basically no noticeable impact on their results. In this strategy I still feel confident on the long-run even though some of the PMs will inevitably be different eventually.
Can you do a video on QQA?
How are you arriving at the 97% figure? Just cumulative over the 40 years? It looks like around 1999 to 2001 was a period of extreme out performance but outside of that it largely tracks the S&P 500? If taking the performance comparison year to year it does not beat the S&P 500 as regularly as the title suggest? Just in the past 10 years S&P 500 has outperformed PRIMECAP 4 of the years. I am not sure where to get the data further back than 2014, the Vanguard website only seems to give to 2014. Curious if the 97% beating the S&P would maintain if those 2 years of outperformance where removed since it looks like it tracks the index the rest of the way (especially since the last 10 years it is just slightly below the index, indicating maybe earlier in fund life performance drives out-performance)? I really like your content by the way, wondering your thoughts on those years influence on the data? It does look like the fund has great potential and has not had as rough drawdowns as the S&P. Thank you again for putting out thoughtful content, so much of youtube finance is junk and I appreciate you putting out quality educational material.
Thank you! So that refers to rolling monthly 10 year periods over the lifetime of the fund. That means like 1/1/90-12/31/99, 2/1/90-1/31/99, etc. So, those 2 years actually don't have that big of an impact on the 97%, but they do have a decent impact on the magnitude of ever excess return. It's a bit disingenuous to cherry pick results to remove but just for fun, from inception to 12/31/98 it beat voo by 80bps/yr and from 1/31/01-9/30/24 it beat it by 143bps/yr. So, but 260+ but still much better before and after. Oh and Morningstar uses the Vanguard 500 mutual fund's results before the ETF came out. They consider the ETF basically a new share class of the same exact strategy.
Another interesting note related to that time period is that it trailed VOO 3 of 4 years from '95-'98 since it largely avoids the largest, most popular, most expensive stocks. That's what led to such great results when they were proven right in the long run (tech bubble crash). Now they are behind over the last 3/5yr periods for largely the same reason... will they be proven right again? Time will tell but a few months ago we did a video about AI being in a bubble so I think they will be.
@@FundamentalsofFinance Thank you for the thorough and thoughtful reply! The added detail is very helpful! I appreciate you taking out what looks like a cherry picked era of out-performance and letting us know the result! I was curious as to why it seemed to do so well during that time period, but I am more impressed it seems to avoid the big draw downs or at least they don't seem as bad when tech corrects. - Keep up the solid educational work, the internet needs you! :)
Thank you!!! Will do!
is there a way to emulate primecaps approach with actively managed etfs? what would you recommend?
Not really but CGGR would be the closest one I can think of.
What is the difference between vpmcx and vpmax?
Admiral shares
Is there a Fidelity version of this? Or another company?
No it's active. One of a kind. American Funds are managed with a similar process but none of the funds are the same as this.
.38 is not my idea of low expenses. What am I missing?
It's an actively managed account. One that has destroyed thr legendary S&P 500 at that. Go look at the history of ER's and fees and also look into prices for ACTIVELY MANAGED funds. Particularly mutual funds that have anywhere near this level of performance over 40 years (good luck finding another to begin with). Hell, funds with dog crap performance relative to this that are actively managed often cost much more.
So, next you ask how make sure you are comparing apples to apples. This isn't some robo advisor fund that just follows an index. That is damn cheap for an actively managed fund if it's calibur.
Maybe I'm confused, but this fund shows me 13.5% annualized return in the past 5 years, hardly beating VOO
I literally put a long-term chart right at the beginning showing what i was referring to. 2 of them actually. If the most recent 5yr period was a good predictor of the future then everyone would be wildly rich from investing.
@FundamentalsofFinance oa, sorry I missed that, thanks
@@ophirmayer1You should be looking past 5 years anyhow btw. That's not a long term deal at all. This last 5 years has been like a bubble for AI. Not to mention had crazy stuff like covid and abnormal circumstances in general. Cherrypicking such a time like that is silly. He gave you like 30-40 years of data which is WAAAAAY more impressive. Gotta learn to compare funds intended for the long term to (both of these) to be compared by long term charts.
incoming "primecap and chill" comments on financial subreddits lol
Haha yes! Let's get it started!
Not gonna lie, he may just convince me to move my funds BACK into Vanguard. I legit moved the vast majority of my funds there elsewhere (for a rather large bonus) in part due ti how behind the times they were with their applications, navigation, UI/UX, & navigation. A fund like this though is pretty incredible and I may have to go ahead and move some things around again since Vanguard is the only place to buy this one.
first
"If you ain't first, you're last" - Ricky Bobby lol