How well have the substitutes performed versus the closed Funds?

Health care?

Capital Opportunities?

Primecap?

Have I left any out?

Here are the YTD numbers of the Vanguard funds vs. their substitutes.

1. VHCOX -4.6%
2. POAGX -9.5%

1. VGHCX -8.4%
2. ICHCX -16.0%

1. VINEX -6.3%
2. FSCOX -4.9%
   

1. VASVX -8.5%
2. VMVIX -3.4%

Not exactly his finest moment, is it?  Even the Vanguard picks are down an average of 7%.  Some of the funds frequently advocated here include:

TSM: Down 3.3%

TISM: Down  2.51%

SCV: Up 0.52%

REITs: Up 9.91%

Not to mention anything with bonds in it. 

Not exactly his finest moment, is it?  Even the Vanguard picks are down an average of 7%.  Some of the funds frequently advocated here include:

TSM: Down 3.3%

TISM: Down  2.51%

SCV: Up 0.52%

REITs: Up 9.91%

Not to mention anything with bonds in it. 

[/quote]

Last I recall, TSM has barely beaten cash since 1999.  REITs and SCV have had a good year, but did lousy last year. 

Petrocelli 

Not exactly his finest moment, is it?  Even the Vanguard picks are down an average of 7%.  Some of the funds frequently advocated here include:

TSM: Down 3.3%

TISM: Down  2.51%

SCV: Up 0.52%

REITs: Up 9.91%

Not to mention anything with bonds in it. 

[/quote]

Last I recall, TSM has barely beaten cash since 1999.  REITs and SCV have had a good year, but did lousy last year. 

Petrocelli 

[/quote]

Nobody's relying on anything, you know that as well as I do. I commented on "the moment."  I'm just saying his picks are having a rough year so far.  That's all.  Don't read more into the comment than is already there. 

The substitutes do not seem to track well with the target funds over 3 and 5 years.

Would the index growth portfolio be a better choice?

Here are the YTD numbers of the Vanguard funds vs. their substitutes.

1. VHCOX -4.6%
2. POAGX -9.5%

1. VGHCX -8.4%
2. ICHCX -16.0%

1. VINEX -6.3%
2. FSCOX -4.9%
   

1. VASVX -8.5%
2. VMVIX -3.4%

Petrocelli
[/quote]

The first three funds have been closed for over 3 years, so looking at 3 year performance might give another valuable perspective.  (The last fund isn't closed).

Three year period, average annual returns, per M*

1.  VHCOX  13.77%

2. POAGX  10.14%

1. VGHCX  5.43%

2. ICHCX  -0.44%

1. VINEX  29.82%  (cum since 1/1/06)

2.  FSCOX  25.25%  (cum since 1/1/06)

1.  VASVX  6.96%

2.  VMVIX  didn't exist three years ago

So....each of the "substitutes" substantially underperformed the Wiener pick.

If you took the low-cost passive route you would have done better.  Had you picked IWP rather than POAGX, you would have done better (you would have actually beaten VHCOX too).  If you picked VHT instead of ICHCX you would have done better too.

Actually, if you had picked a diversified 70/30 mix of VTSMX and VGTSX you would have beaten a portfolio of these four Vanguard active funds over the past 3 years too.

For those who don't accept the passive approach, be sure to recognize that investing in the "alternative" fund is a break from the low-cost discipline that all Vanguard Diehards share - whether active or passive.  Two of the three "alternatives" for the closed funds have an ER of 1.25% and 1.20%.  And don't forget the "low turnover" approach that we all agree on either.  FSCOX wasn't in existence until August 2005, while VINEX closed in August 2004.  That means you are switching from one alternative fund to another, causing tax problems.  Same for VMVIX - it wasn't in existence until August 2006, so switching to this new "alternative" is tax inefficient.

Active or passive - you gotta watch out for the high costs and turnover.

Best wishes.

Andy

Of course, an awfully lot of DW subscribers owned VHCOX, VGHCX, VINEX, and VASVX BEFORE they closed, thank in part to his recommendation.  And an awful lot of folk who didn't subscribe when the funds closed owned them too.  The reason why they closed is because an awful lot of people owned them.

I think Dan has been fairly consistent with his opinion that Vanguard is the best fund family.  I would personally use index funds in the asset class of the closed funds before using higher cost alternatives.

[quote user="rpetrocelli"]

Isn't there a pat line I can use about relying on less than 6 months data? 

[/quote]

It takes a full year of data to select the next Hot Hands fund.

- Tom

Andy... you are correct on both accounts... the substitutes have underperformed the closed funds and the substitutes are more costly.

Much of the dissatisfaction/grumbling with Dan Wiener's newsletter is over the fact that the substitutes have underperformed.  There is a steady discussion of what is a better fund.  

For example, I personally prefer VMGIX (Mid-growth Index) as a substitute for VHCOX.  Dan prefers midcaps to large caps as the core of the portfolio and he has a "buy" on this fund so maybe he is going to add it to the model some day.

In many ways Mr. Wiener has painted himself into a corner.   He limits his fund universe to Vanguard because of low costs, but Vanguard has closed many of their funds and raised the minimum purchase on others leaving him with a small number of choices.  In my opinion, when he looks outside of Vanguard he comes up with really odd choices.

I would never have chosen the IKON Health Care fund as a substitute, or even Fidelity Value, which was a substitute for VASVX for awhile.  

His lack of ability to choose nonVanguard funds, in my opinion reduces the value of his newsletter.  Nevertheless, I still think it is worth the cost... I know we disagree on that.

Best
Stats

I'm not a subscriber, but I'm getting DW's flyers frequently. In those flyers, he makes the claim that somehow he will teach his subscribers how to get into those closed funds.
 

Healthcare, Cap Opp, and Primecap are still open to Flagship investors, along with Precious Metals and Explorer. VINEX is not open to Flagship however.

Does Wiener mention that? He should. 

1) the loop hole to get into closed funds...giving shares..has pretty much been closed.

 
2) Yes, DW has mentioned the closed funds that are open to Flagship. 

nero 

In many ways Mr. Wiener has painted himself into a corner.   He limits his fund universe to Vanguard because of low costs, but Vanguard has closed many of their funds and raised the minimum purchase on others leaving him with a small number of choices.  In my opinion, when he looks outside of Vanguard he comes up with really odd choices.

[/quote]

I agree with you stats.  DW should recommend more index funds for closed funds.  If you can't get in to Selected Value, whey not buy the Index?  I think his anti-index bias may cloud his reasoning sometimes.

Petrocelli
 

My substitutes would have been the following:

Health care?   T. Rowe Price Health Sciences, ER =.81

-7.00  vs. -6.53 

 Capital Opportunities?  PrimeCap Odyssey Growth, ER = 0.75

+1.2  vs.  -1.38

 Primecap?  Vanguard PrimeCap Core, ER=0.55

+2.57 vs. +1.75 

 
Primecap Odyssey Growth is a better fit than Primecap Odyssey Aggressive Growth.

Capital Opportunity is more of a mid-cap/large-cap fund while Aggressive Growth is more of a small-cap/mid-cap fund.  Aggressive growth also has 16% in microcaps. 

Having said that, I own Vanguard PrimeCap Core and PrimeCap Odyssey Aggressive Growth because the two funds have less overlap.  One is a large cap growth fund while the other is a small/mid cap growth fund.