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POCKETBOOK Week Ending Jan. 18, 2019


Jack Bogle, founder of The Vanguard Group  was 89 years old when he passed away on January 16, 2018


  • You can thank Jack

When I began selling securities in the early 1980’s, mutual funds offered investors a way to purchase a basket of stocks instead of having to select one-by-one which company’s stocks to invest in. Back then, mutual funds had been around for 50 years and little by little were gaining ground among investors and particularly those selling them.

Way back then, the draw for investors was the bundle of stock idea; the draw for brokers selling them was the sales charge (a one-time fee similar to a commission) —typically 8.75% on equity funds.

Something not always addressed back then was a mutual fund’s annual management fees that averaged as high as 1.75% per year. That fee relates to what we hear of as the cost of “active or passive management”. Or, the cost of a fund’s professional management relating to what stocks are purchased and sold in a mutual fund’s portfolio.

Additionally and more importantly, back then there were no equity funds with low sales charges funds, low management fees or index funds around to invest in.

While there are a few reasons when, why and how the sales charge costs and annual management fees have dropped on funds, there’s one man who had a huge impact on a couple of fronts on this product: John C. Bogle.

Thanks to the research, proven investment philosophy and the continued drum-beating of Bogle, Wall Street and investors learned two really important things. First, it’s hard to beat the market—the market representing the performance of an index such as the S&P 500. Second, costs matter. Cost like paying a sales charge on your fund investments and the cost of paying annual management fees on the equity funds you own.

In 1974, Bogle created the Vanguard fund family and in 1976 introduced the Vanguard 500 Index Fund, a low-cost passively managed portfolio of stocks designed to mimic the performance of the S&P 500 index.

And mimic it has done resulting in a solid track record of making money for its shareholders  as actively managed funds have had a hard time beating the performance of the S&P 500 over the long-term.

Depending upon the type of equity fund and the performance years measured, it’s difficult to come up with one figure that represents how often and by how much a passively managed fund, such as an index fund, beats the performance of an actively managed equity fund. Figures for it differ from year to year and fund type to fund type and may range as high as 90-some percentage of actively managed funds that don’t beat that of the S&P 500 in one year to underperforming actively managed ones in another. But more often than not it’s fair to say that index funds often outperform actively managed ones.

Bottom line: Jack Bogle influenced the mutual fund industry in a hugely positive way and provided a wonderful, simple approach to investing through low-cost, passively managed index fund investing. (FYI: The  symbol for various  S&P 500 index funds include: SPDR S&P 500 (ETF), SPY; Vanguard 500 Index  fund is VFIAX; Vanguard Total Stock Market fund, VTSAX; an Fidelity 500 Index fund, FXAIX.)

That said, there will always be risks to equity investing and there are no guarantees that your fund choice(s) will be financially rewarding or punishing no matter what syle of stock selection or management style  is used.

Making money, whether it be in funds or individual stocks, always depends upon two things: Your choices and the time period you’ve participated in the market.


  • Market Quick Glance


After plenty of minuses, for the second week in a row the indices are smiling.

All three made nice gains last week with the Nasdaq’s year-to-date return ending higher than the other indices and sat at nearly 8% at the close of business on Friday..

Below are the weekly and 1-year index performance results for the three major indices—DJIA, S&P 500 and NASDAQ — including the dates each reached new highs. Data is according to CNBC.com and based on prices at the close of business on Friday, Jan. 18, 2019.

DJIA  5.91% YTD way up from the previous week’s 2.87%.

  • 1 yr. Rtn -5.04% improved from the previous week -6.17%

Most recent DJIA a new ALL-TIME CLOSING HIGH was reached on Oct.3, 2018 of 26,951.81. The previous high was reached on Sept. 21, 2018 of 26,796.16.


-S&P 500   6.54 % YTD way up from last week’s 3.57%

  • 1 yr. Rtn -4.55% improved from last week’s -6.19%

The S&P 500 reached a BRAND NEW CLOSING ALL-TIME HIGH on Sept. 21, 2018 of 2,940.91. The previous closing high was reached on August 29, 2018 of 2,916.50.


-NASDAQ  7.87% YTD way up from last week’s 5.07%

  • 1yr Rtn -1.90% improved from last week’s -3.33%

Nasdaq reached a BRAND NEW 52-week CLOSING HIGH on August 30, 2018 of 8,1333.30. The previous high was reached on August 24, 2018 of 7,949.71.


-Mutual funds

Repeat from last week:

Looking up.

At the close of business on Thursday, Jan. 10, 2019, the total return for the average stock fund under the broad U.S. Diversified Equity Fund heading was 4.70%, according to Lipper.

Looking at the fund types with the highest year-to-date gains under the various headings shows the following:

-U.S. Diversified Equity Funds average, 4.70%; highest Equity Leveraged Funds, 11.08%; lowest, Dedicated Short Bias Funds, -8.88%

-Sector Equity Funds average 4.88%; highest Energy MLP Funds, 11.74%; lowest Alternative Managed Funds, -2.20%

-World Equity Funds average 4.07%; highest Latin American Funds, 9.01%; lowest India Region Funds, -1.23%.

Visit www.allaboutfunds.com for more information about how various equity and fixed-income funds have rewarded investors over the short-and long-term, based upon Lipper data. Short-term meaning weekly and monthly performance returns; longer-term includes quarterly, year-to-date, 1-yr, 2-yr, 3-yr and 5-yr returns.


  • Palladium

A while back I mentioned palladium and I’m mentioning it again. Why? Because in 2018 it beat the performance of gold and some think  it could do the same this year and going forward.

That thinking is that due to demand and supply imbalance and the fact that other commodities are being dragged down by a strong dollar and the global slowdown.

Oh…then there is the biggie: Palladium is used to make catalytic converters in gasoline automobiles.

And, as the world begins to switch from gas-fueled autos to hybrid vehicles that matters. A lot.