A foolish investment unexpected success

When my lifelong best friend and his wife had a son at the end of 1994, I want to give their children something special, so I’m at a place called Giftrust Fund invests $ 1,000 of the twentieth century. You can invest in this fund as a unique lasted at least 10 years irrevocable trust outside people who are not your spouse a gift. (Minimum holding period, later raised to 18 years.)

I started as an investment writer at Kiplinger’s Personal Finance magazines, so naturally, my friend and his wife thought I knew what I was doing. Originally, I had more to learn. Since I have confidence in the long-term trend of rising stock prices, and in time, excess returns of small company stocks, investment made sense to me. In hindsight, LO narrow strategic fucking money for so long is a costly mistake.

In the early 1980s to the mid-90s, twentieth century, and later changed its name to American Century, is one of the hot fund company. It focuses on small companies to accelerate earnings and stock sales, a lot of these technology stocks. The company’s momentum strategies in the stock market than zero, it is best to work with a small company’s stock. These funds stellar performances, for me and many other investors.

In addition, the trust structure gives the fund its edge. Giftrust buy stocks of small, did not face forced to sell stocks at fire-sale prices in the market unfriendly dilemma meet redemptions.

The Fund is an incredible, if unstable performance from my TS in the second half of 1983 to November 1995. During that time, the fund each year shellacked Standard & Poor’s 500-stock index by 7.5 percentage points to an alarming average. Kipling and other magazines to sing its praises. But then he sank three consecutive years, losing a total of 24%, even in the Standard & Poor’s 500 index rose 103%. If I had the choice, I would probably sell at or after these losses. Wretched three years of underperformance? This is not a good sign.

In 1999, the fund rebounded, soaring 87.3% of the tech bubble nearing its peak. In the 2000-02 bear market, high-tech, because the standard & Poor’sSeoul fell 47.4%, Giftrust did far worse, plunged 72.8%.

At that time, my friend probably thought I was an idiot to invest, who I will always be an argument? Ť hey had added $ 2,500 to their son in December 2000, Giftrust equity, technology stocks are collapsing. The entire investment quickly underwater.

As of December 31, 2003, Giftrust one million with total assets of $ 905 and some 300,000 investors, many of whom also represent a great loss. American Century with investors angry phone calls and letters surrounded. Followed by a disgruntled investor lawsuit who can get their money, minus a handful of their losses and legal fees.

Tried almost all of the American Century Giftrust repair the mess has become. From 1996 to 2003, the company has assigned four different management team to reverse the fund, but to no avail. Giftrust slowly evolved into a mid-cap growth fund, then to most market fund.

In 2005, the state legislature in Missouri, in the position of the American century, enacted a law that makes it easier to escape from the trust as Giftrust. Exit Giftrust now just fill out some forms of problem.

Coincidence or not, this time to return to their long-term recovery from drought. From 2005 to April 19 this year, the fund is better than the S & P rose 3 percentage points in each year of 10.7% -an average of. In the past 15 years, the top 10% of the fund ranks in the large company growth fund, although who saw later on to buy more decidedly different results in people.

In late 1990 caused too much damage is funded entirely overcome. I invested $ 1,000 annual rate of return of 6.8% Ø version full 22 years, it has invested an average increase of 2.5 percentage points per year, lagging behind the Standard & Poor’s. $ 2,500 of my friends to join the annual return of 5.6% per year, barely behind the S & P, an average of 0.6 percentage points.

In 2011, American Century quietly changed its name to American Century Giftrust all growth stocks (TWGTX). It is open to all investors, though thoseWho wants a long-term lock Giftrust still can get it fund by filling out some additional paperwork. Now, these investors trust the number of 3700, compared with less than 15 percent, the fund 15 years ago. The total assets of all growth stocks, including trust assets for $ 1.1 billion.

This is what my friends say? His son graduated from college last year, did not dipped Giftrust, and the fund has continued to grow d. Without regard to taxation, investment is now worth $ 10,540. He will not be in the S & P index fund is better? of course. The investment will grow to $ 13,410. Lots of actively managed funds do better. My friend, his wife and their son is very happy with their nest egg has grown into Giftrust. In fact, their son is still owned by the fund.

What I learned from all of this everything you need? First, and most importantly, experience shows how much wealth you have established, even if you do not invest in the right stock funds. Purchase, hold and watch your money grow is really hard to witness the Giftrust litigation, but it usually did not have the heart of people.

But I also learned that every investment strategy and go out of style. So this is a strategic research and Giftrust momentum trumpet. More importantly, Giftrust is 20% more volatile than the S & P over the past 15 years. I never knew a fund, did not ultimately pay the price, this high volatility. Investment, slow and steady does win the race.