Investment in Value trust

Question

What is your recommendation concerning investment with/in the Value Trust?

a.  Why do you recommend?
b.  Why don’t you recommend?

Answer 1

One should be very careful while investing in mutual funds especially if the economies over the world are not faring well enough. One can see that the Miller fund outperformed the markets for almost 15 years and not just outperformed, did significantly better which is a contrarian result to what the efficient market hypothesis states. Now investment into a fund by Miller should be taken care of from one aspect and that is risk. The risk quotient of companies change over a certain period of time even if one has invested from the long term perspective because there might changes in the market which will bring about massive changes in the way a particular company or industry functions. If we take the current example of Facebook IPO, it is a company that showed a huge P/E ratio and is supposedly going to grow faster than any other newbie in the social networking arena but the point remains that it is a company not driven by strong fundamentals and the basic concept of a social networking website will fail when it reaches a saturation that is absorbs the entire population of the world to its website. The Facebook IPO was a huge boost for the Wall Street maybe but a sad story from the next day of its launch.

My recommendation would be to go for this fund because of the experience in the market it has of defeating the benchmark index and also of the various economic changes it might have sailed through. Bill Miller uses those funds which eliminate expense ratio into the calculation of net asset value. Why I do not recommend the fund is due to the over confidence of the managers towards their skills and abilities and their past performance. Their over confidence should not lead to irrational behaviour leading to a downhill for the investors as well as the fund. Another reason is that Miller’s fund would keep growing and in that growth phase, Miller would like to use the success strategies that he has been using all this while but the point of worry is that he already has too much of those strategies and might need to come up with some new ones to continue good performance in the future.