The Individual Investor’s Guide to the Top Mutual Funds
Published on - March 27th, 2008 (by J.D. Roth) 
Because I thought it would be a great source of material for Get Rich Slowly, last fall I enrolled in a lifetime membership to the American Association of Individual Investors. AAII is a non-profit founded in 1978 to provide individual investors — people like you and me — with tools and knowledge to better approach the stock market.
I’ve been receiving the monthly publications for a while now, but haven’t had a chance to give them a close examination. The articles are thorough, much more thoughtful than most of those in the major personal finance magazines. They can also get a bit technical. But I like what I’ve read. I intend to provide a more in-depth review later this year.
But the reason I’m writing now is to express my awe over a book AAII sent in the mail last week: The Individual Investor’s Guide to the Top Mutual Funds. W-o-w. This book is amazing. From the preface:
The purpose of this Guide is to highlight the funds that would be of most interest to investors: funds open to new investors with historically superior returns in their classes, low expenses, no or low loads and that are directly available from the fund, no intermediary required.
The book contains 60 pages introducing the basics of mutual funds and investing, but the meat of it is nearly 400 pages of detailed mutual fund stats. The entries remind me of those in a baseball almanac: lines and lines of juicy numbers. That probably doesn’t mean much to most of you, so here’s a scan for one of the funds GRS readers often mention:
An expanded version of The Individual Investor’s Guide to the Top Mutual Funds is available as a PDF download to AAII members [login required]. I suspect some public libraries will also have a copy.
I don’t endorse a lot of products at Get Rich Slowly, but from the few months I’ve been a member, I really like the American Association of Individual Investors. If you’re serious about investing, I think the $29/year membership fee is a bargain. (But I also believe there’s no reason for the average person to rush out and join.) I hope to share more from AAII in the future!
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0.00% expense ratio? Vanguard’s site says 0.32%. That’s a pretty important number to have.
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It doesn’t list the expense ratio at all, just the fees — which seem accurate to me, STAR doesn’t charge any loads or 12b-1 fees.
Which seems an odd omission. As Anne says, the ER is a pretty important number.
(On edit: Ah — immediately after posting I noticed the line under the Per Share Data listing the historical ER. Yes, that does seem wrong.)
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You’re right — that is a curious omission. In the book, there are actually a block of five Vanguard funds in a row with incorrect (mostly 0.00%) expense ratios. Sounds like an editing error, and an important one at that.
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I’ll definitely look into that, it seems good! Though I’m personally not a fan of mutual funds at all, the premise of the AAII seems to be pretty good and after looking at their website I’m definitely interested (though not American)
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Past performance is not an indicator of future returns…
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It looks like you can buy this book for $5.48. Did a search and something called alibris came up on buy.com, where copies are allegedly for sale at that price. Is yours a newer edition than 2002?
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What does this book provide that Yahoo! Finance and Google Finance fail to offer? I find these sites usually provide the generic overview that this does and the user can simply drill down news stories and prospectus information.
Thanks in advance!
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Lifetime member, way to go J.D.! Best investment you can make (and you’ll see that once we exit the “trader’s market” and resume regular investing patterns). Remember to run your stock screeners mid-month when they get the data updated.
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If you look closely at VGSTX, you will notice that it is a non-managed fund that invests in other Vanguard products. So while there is no direct expense ratio for this fund, I would imagine that it is paid on each Vanguard fund that the STAR fund holds, though not directly out of this particular aggregate fund.
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@ JK:
I think that “funds of funds” have to disclose all fees, direct or indirect. I did a search to see if Target Retirement Funds were “double dipping” on the expenses and it turns out that they do not. I would expect the same thing from the Star Fund, especially considering Vanguard’s typical low cost.
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This isn’t impressive. Have you seen a Morningstar report?
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I haven’t seen a Morningstar report. What’s the best way to access them? I’d love to take a look.
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I agree with the author of “Cash-Rich Retirement” that looking at the PAST performance history of funds may not be very helpful going forward as millions of Baby Boomers begin selling off assets. When we look at “superior” funds, aren’t we identifying ones that performed well in the previous financial and demographic cycle, but may not perform well in the cycle ahead? These kinds of reports strike me as stale.
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JD:
http://quicktake.morningstar.com/fundnet/Snapshot.aspx?Country=USA&ss=gf&Symbol=VGSTX
You can get more detailed reports, but they are a premium service.
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JD- You forgot to tell people the membership fee might be a deductible investment expense because it is a research tool for investing.
IIRC, investment research costs are deductible, so newsletters and magazines you use to self-educate fall into that category.
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Guys, bear with me, but I’ve got a rookie question. When I look at that Vanguard STAR page JD scanned in, or Google Finance, I don’t know what it is I’m looking at. I’m immediately affronted by acronyms and jargon I’m not familiar with. How does one learn how to read pages like this and understand them? Thanks.
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@Dustin:
Read, read, read. Vocabulary is always increased by reading more stuff. I suggest books like A Random Walk Down wall Street by Burton G. Malkiel as a great place to learn about many of the terms and issues represented on that data sheet. Of course in reading it you may come to believe that many or most of those statistics are perfectly meaningless since they represent what HAS happened and have very little bearing on what WILL happen.
See J.D.’s post on “25 of the best books about money” (find the link in the top right corner of any page here…) for more great book suggestions. I’ve been working my way through this list for many months.
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MITBeta is right — reading a good book on the subject will probably help. (The book I mentioned here explains all the numbers.) On the other hand, it’d probably make a good blog post to try to explain this info, too. I’ll see what I can do.
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@JD
That’d be swell, JD. I’ll check out some of the books as well. I actually just bought a book. It’s called The Teenage Investor. I’m 27. Sure, sure, yuck it up all you want, but my theory is that a book geared toward kids is less likely to try to explain jargon using other jargon. I’ll let you know how that pans out
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