Investing Like the Pros Do:Combining Index Funds With Alternative Strategies
There is -- apologies for the pun -- a beta way to invest.
If you're like many mutual-fund investors, you own a mix of actively managed stock funds that tap into a host of market sectors, such as large companies, small stocks and foreign shares. And, of course, you are hoping to beat the market.
Problem is, a lot of what you're paying for isn't stock-picking skill, but basic market exposure -- and you could get that a whole lot cheaper by buying market-tracking index funds.
Indeed, institutional investors have woken up to this fact. It explains their enthusiasm for not only prosaic index funds, but also exotic investments like hedge funds and venture capital, where returns depend less on the market and much more on the investment manager's skill.
? Slashing costs. As regular readers know, I believe the odds of beating the market over the long run are so slim that it isn't worth the effort. But if you're going to try, at least go about it in an intelligent fashion.
That brings me to a key concept. Every fund's performance can be split into two parts. First, there's the return that a fund should get simply because it is invested in the market. A fund's sensitivity to market movements is captured by a statistical measure known as "beta."
Second, there's the performance that can't be explained by the fund's market exposure. This "unexplained" return, which reflects the manager's luck or skill, is often dubbed "alpha" by academics and Wall Street experts.
When you buy actively managed stock funds, you are buying both alpha and beta. You get the underlying market's annual performance, plus or minus a few percentage points, depending on whether the manager picks well or picks badly. Unfortunately, even if a manager picks reasonably well, the stocks selected often aren't good enough to overcome the drag from the fund's fees.
Those fees can be hefty. Suppose you have $300,000 spread among stock funds that charge 1.5% of assets each year. That works out to $4,500 annually for active management -- and we haven't even figured in the funds' trading costs.
Sound steep? Imagine, instead, that you stashed $240,000, or 80% of your stock portfolio, in a mix of U.S. and foreign-stock index funds that charge 0.25% a year. Result: You have locked in the stock market's return with 80% of your portfolio -- at a cost of just $600 a year.
"The idea is not to overpay for beta," says Greg Ehret, co-head of SSgA's Advisor Strategies group, a unit of Boston's State Street Corp. "For your market exposure, you might as well use the most efficient vehicles possible," such as exchange-traded index funds or regular index-mutual funds.
? Boosting returns. What should you do with your portfolio's other 20%, or $60,000? This is your chance to earn alpha -- and you might want to take a few cues from institutional investors.
Check out the accompanying chart, which is based on data from Pensions & Investments, the biweekly newspaper. Over the past decade, pension funds have favored the two extremes, buying both humdrum index funds and also alternative investments like private equity, venture capital, real estate and hedge funds.
True, hedge funds and their ilk often charge outrageous expenses. Still, if you index 80% of your stock portfolio and stash 20% in exotic alpha investments, your total costs should be far lower than if you had bought a conventional portfolio of actively managed funds.
The idea of separating alpha and beta might seem similar to the strategy of "core and explore." With core and explore, however, investors will often purchase the Standard & Poor's 500-stock index of big blue chips and then buy actively managed funds for smaller companies and foreign stocks.
By contrast, when splitting alpha and beta, you really want to index both U.S. and foreign markets, and then tack on bets that have the potential to deliver a lot of alpha.
For instance, you might overweight attractive sectors or purchase a handful of your favorite stocks. Even if you get it wrong, you won't do too much damage to your wealth, because you're only playing with a small portion of your portfolio. "It's like going to Las Vegas and putting $500 in your pocket, and saying, 'That's it,' " says Donald Mulvihill, a managing director with Goldman Sachs in Chicago.
Alternatively, you could buy funds that focus on a concentrated portfolio of some 20 to 40 stocks, such as CGM Focus, Fairholme and ICAP Select Equity, or purchase mutual funds that use hedge-fund-type strategies, like James Market Neutral and Laudus Rosenberg Value Long/Short.
"If you're buying a satellite investment, buy something with a lot of alpha in it," Mr. Mulvihill says. "Don't buy a small amount of alpha with a lot of beta," which is what you're getting with the typical stock fund.
Keep three things in mind. First, your alpha bets could generate big tax bills, so keep them in your retirement account.
Second, while a straight stock bet will give you both alpha and beta, hedge-fund-type mutual funds often aim to eliminate basic stock-market exposure. They do this by taking offsetting bets, both buying promising shares and simultaneously "shorting" unattractive stocks, in a bet they will fall in value.
As a result, their performance isn't driven by broad stock-market swings. Thus, you should arguably substitute these funds for part of your bond portfolio.
Finally, keep close tabs on how your alpha bets perform. Not doing especially well? Maybe you should give up the pursuit of alpha -- and stick exclusively with low-cost index funds.
混合投资
现在有一种更好的投资方法，那就是beta投资法。
如果你是共同基金投资大军中的一份子，那么你必然拥有一些主动管理型股票基金，它们投资领域广泛，如大型股、小型股和外国股票。而且，你自然希望能取得高于市场平均水平的回报。
问题在于，你虽然花了不少钱，但并没有运用多少选股技巧，只是在进行一些基本投资而已。实际上，购买追踪大盘的指数基金能达到同样的效果，还能省不少钱。
机构投资者早就意识到了这一点。因此，他们不仅对看似乏味的指数型基金很感兴趣，而且还投资于对冲基金和风险资本，后者的投资回报不太依赖大盘走势，而主要依靠基金经理的投资技巧。
削减成本。经常阅读我的专栏的读者都知道，我认为从长期来看，投资回报好于大盘走势的几率是微乎其微的，所以不值得花很多精力。即使你打算尝试，至少要做得聪明些。
接下来是一个重要的理念。每个基金的表现都可分为两个部份。首先，既然在市场上进行了投资，每个基金都应该有回报。基金对大盘走势的敏感度可以由统计指标beta加以衡量。
其次，基金的表现还包括基金的投资面不能完全反映的部分。这种“无法解释的”投资回报反映了基金经理的运气和技巧，它常常被专业人士和华尔街专家称为alpha。
当你购买主动管理型股票基金时，你既购买了alpha，也购买了beta。你的投资回报相当于大盘的平均水平，再加上或减去几个百分点，后者取决于基金经理的选股是否恰当。不幸的是，即使基金经理选择恰当，所选股票的上佳表现通常仍难以弥补基金费用带来的拖累。
基金收取的费用可不少。假设你把30万美元投资于年费率为1.5%的股票基金。那么，每年的管理费用就是4,500美元，我们还没算基金的交易成本呢。
听上去很昂贵吧？再设想你把30万美元中的80%，即24万美元投资于追踪美国和海外股票的指数基金，它的年费率为0.25%。结果：你用投资组合的80%就锁定了股票市场的基本回报，而成本仅为600美元。
“原则是不要为beta多掏钱，”格雷格?爱赫特(Greg Ehret)表示。他是波士顿State Street Corp.旗下SSgA's Advisor Strategies的联席主管。“最好尽可能地利用最有效的工具对大盘进行投资，如交易所交易指数基金或一般的指数共同基金。”
提高投资回报。那么投资组合中剩余的20%，即6万美元应该怎么投资呢？这是你获得alpha的好机会了，也许机构投资者能教你几招。
在过去十年里，退休基金偏向了两个极端，既投资于单调的指数基金，也投资于诸如私募基金、风险投资、房地产和对冲基金等另类投资。
当然，对冲基金等另类投资收费通常很高。不过，如果你把投资组合的80%投资于指数基金，而其余20%在alpha投资里，你全部的投资成本依然远远低于把钱全部投资于传统的投资组合、或是主动管理型基金的投资成本。
把alpha和beta分开的理念似乎与“核心与开发”的策略相似。在“核心和开发”策略中，投资者通常购买标准普尔500指数中的蓝筹股，同时也购买投资于小公司和海外股票的主动管理型基金。相比之下，在alpha和beta理念中，你是希望购买追踪美国和海外市场的指数基金，同时向那些有望释放alpha的投资下注。
例如，你也许会增持那些有吸引力的股票，或是买进几只青睐的股票。即使你的决定是错误的，你的财富也不会损失很多，因为那只不过是你的投资组合的一小部份。“这就像去拉斯维加斯，身上带著500美元，就这么多了，”高盛集团(Goldman Sach)驻芝加哥的董事总经理唐纳德?莫维希尔(Donald Mulvihill)说。
不然，你可以购买集中投资于20至40只左右股票的基金，如CGM Focus、Fairholme和ICAP Select Equity等，或是购买投资于采用对冲基金策略的共同基金，如James Market Neutral和Laudus Rosenberg Value Long/Short等。
记住三件事。首先，你的alpha投资可能会带来大量的税单，因此把投资放在退休金帐户上吧。
其次，一只股票就会给你带来alpha和beta，而对冲基金类型的共同基金通常旨在消除基本的股市风险。它们既会购买具有增值潜力的股票，同时也会“做空”那些不具吸引力、股价可能会下跌的股票。
因此，它们的表现不会受大盘波动的影响。你可以用这些共同基金来替代你的部分债券投资。
最后，密切关注alpha投资的表现。表现不好？也许你应当放弃追求alpha，转而坚持投资低成本的指数基金。
