The Best Investing Advice? Maybe Not the Conventional Method

Interesting piece from the NYT regarding investment style and management.  The point here is that you have to be flexible with your trading strategy.  Various trading themes come in and out of favor and having the ability to adjust is critical.

I have never expected the DWCM portfolio would fit neatly in a defined Morningstar style box.  I believe that one our invest anywhere style and strategy is one of the advantages that sets us apart from other funds.

From the article

• The study was based upon 306 funds that were founded before 1989 and still exist. They all invest broadly with various styles and none concentrated on one sector. The data spans 21.75 years, from Dec. 31, 1989, to Sept. 30, 2011. The performance of the funds was measured against the Vanguard S.& P. 500 Index Fund, which had annual returns of 7.65 percent during that time.
• The best-performing funds over time were not necessarily the ones with the lowest fees, run by the best-known managers or focused on any particular strategy, according to more than 20 years of data.  This bodes well for an upstart firm such as DreamWorks Capital Management
• The top-performing mutual fund in the study was the FPA Capital Fund, which invests in small- and midcapitalization stocks, generally defined as companies with market capitalizations of $300 million to $10 billion. It had an annual return of 14.43 percent, and it beat the index 15 times.
• The best manager against the benchmark was Bill Miller, chairman and chief investment officer of Legg Mason Capital Management. His Value Trust fund outperformed the benchmark in 16 of the 22 periods of the survey. Yet it ranked only 187, with an annualized return of 7.37 percent. This was lower than the benchmark.  Mr. Miller was just recently forced out of his fund management position at Legg Mason after an incredible run.
• One reason star managers fail over the long term is that they become known for a particular style of investing that may go in and out of favor. DAL’s research found that no one style was dominant for the whole period. But funds focused on small- and midcap stocks did perform the best over this period.  Again having the flexibility to be able to shift styles and investing strategies would be beneficial in order to maximize returns and even reduce risk.