Case Brief for Bill Miller and Value Trust
In 2005 mutual funds were the fastest growing investment vehicle in the United States. Bill Miller is considered one of the greatest mutual fund managers of all time, since 1982 he defied the odds by consistently creating returns with his investments that outperformed the S&P index fourteen years in a row. There have been investors who created better returns in a year, but none have come close to have long term returns like his. The problem in this case is to determine if it’s rational for an equity investor to buy shares of Value Trust. Looking at the success Bill Miller achieved with his mutual fund, it seems rational for an investor to buy shares in Value Trust in 2005. It’s rational in my opinion, and I personally would have invested with him because I agree with Bill Miller’s investment strategy. Value Trust had a low PPE ratio and provided a consistently good dividend yield. Some analysis I would perform before I invested with Value Trust is the Net Asset Value, Annual Total Value, Expense Ratios and Risk Adjusted Returns. The Net Asset Value measures the value of each share the mutual fund, which is important because tells how much your investment is worth when you decide to redeem for cash. Annual Total Return is the measurement of the fund’s performance; it measures the change in net asset value, dividends and capital gains. Loads and annual payments are extremely important to know before investing because high expenses can have a dramatic effect on shareholders return. Loads are a initial onetime fee charged for investing in the fund. Annual payments are charged yearly and are used to compensate the fund’s manager, administrative and advertising. These expenses are calculated as a percentage of the fund’s total assets, this is how the expense ratio is derived. From analyzing Bill Miller’s investment strategy I found he tends to accept a lot of market risk in buying recently high priced...
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