Guru Investments vs. Mutual Funds
It appears that buying a mutual fund could be less risky than making investments through most gurus.
The “Score Board of Gurus” (http://www.gurufocus.com/score_board.php) lists 10-year investment returns of 64 gurus. On top of the list is David Tepper (Trades, Portfolio) with 30.5% returns. Despite such phenomenal results, such performance would be hard to imitate. Tepper is a guru outlier and cannot be compared with others. Therefore, we treat Tepper as an anomaly and not as an investment methodology.
What amazes me is the performance of the Vanguard Health Care Fund (Trades, Portfolio) (VGHAX), which shows 10-year returns of 13.6%. According to Morningstar, its risk were limited to only a single decline in a decade. This fund stands out as the most attractive low risk, high diversification and low cost option for making investments.
When an investor reviews the entire range of mutual fund opportunities, other options become apparent. Gurus such as Leucadia National (Trades, Portfolio), Mariko Gordon (Trades, Portfolio), Daniel Loeb (Trades, Portfolio), Donald Yacktman and Frank Sands (Trades, Portfolio) have each shown two years of relatively high negative declines in 10 years. The exception is Warren Buffett, who shows only a single decline. However, buying such funds will most likely be costly and should be considered only if making such investment is uniquely attractive.
A single year decline in their investment record is exhibited by Vanguard Health Care, Vanguard Dividend Growth and by the Vanguard related Primecap Management. In the investment game, losing less frequently is one of the rules that works for them. Low transaction fees, extremely low management fees and a high level of credibility of the fund managers will favor Vanguard in most situations.
Clearly, the published guru scoreboard does not offer sufficient guidelines for making investments. But, relatively high investment returns above a simple index fund can be realized by buying relatively low risk and low fee mutual funds that offer a high level of diversification without dependency on the performance of a few individuals.
