4min chapter

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Does anyone really buy & hold and more Q&A

Sound Investing

CHAPTER

How to Compare a Mutual Fund to a Small Cap Value Fund

The growth companies have done pretty well lately right? They have been hot. Well they were not hot last year they fell a lot. It is interesting to look at a history of returns and understand what it was like to be in these two different funds. And here's the fascinating part. If you're in that other fund that has about a PE ratio of about nine times it means that you're paying nine dollars for every dollar of earnings. So those companies that are smaller and out of favor people are getting them pretty cheap as they should because they are not the top of the rung in terms of changing our world as we know it.

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If you're in that other fund that has about a PE ratio of about nine times it means that you're paying nine dollars for every dollar of earnings. So those companies that are smaller and out of favor people are getting them pretty cheap as they should because they are not the top of the rung in terms of companies that are changing our world as we know it. But those kind of companies have been around as long as the other companies have been around and the academics have tracked them both and what is interesting is that those growth companies they have done pretty well lately right? They have been hot. Well they were not hot last year they fell a lot. It is interesting to look at a history of returns and understand what it was like to be in these two different funds. And by the way you can do exactly what I did. I went to Morningstar. I put in the ticker symbol for the Fidelity OTC fund. That happens to be F as in Frank. O, C is in Cat, P as in Paul, X. And that particular mutual fund has had a very fine track record. And when you compare it to the fund from dimensional the small cap value fund that ticker symbol is D as in Dog, F as in Frank, S as in Sam, V as in Victor, X. And what you can do is open up the page for either one of these funds. I happen to know that the one that was most recently formed was the dimensional fund. So I'm going to start there and I would go into dimensional funds and you're going to want to look at the chart link just to the right of quote. And that will open up a page where you can see the performance for short or long periods of time and I want you to put in the max, M-A-X. And that will take it back as to the day or to the month that that DFA fund was first offered to the public. And then there's a place where you can compare and you go in to compare and you put in the symbol, the ticker symbol for the Fidelity OTC fund. And what will happen then is you will see the performance compared by the different colored lines. And here's the fascinating part.

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