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Bill Miller and Value Trust

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Bill Miller and Value Trust outperformed the Standard & Poor’s stock index from 1991 to 2005. I used the S & P 500 Index benchmark to make that assessment. Mutual Fund investment performance or Annual total return can be measured as the increase or decrease in net asset value plus the fund’s income distributions. Net asset value is computed as the fund’s total assets less liabilities, divided by the number of mutual fund shares outstanding. Another way to measure investment performance is to use the internal rate of return (IRR). This gives you the periodic rate of return at which your invested dollars produce the investment results you see at the end of the period. Good performance means that the investment would have to provide returns necessary to meet an individual’s goals. Mutual Funds investments don’t have to beat a specific benchmark to be successful. Bill Miller was able to make consistent abnormal trading profits which would explain the fund’s performance. Mutual funds are also likely to outperform the S & P Index when small firms outperform large ones and underperform when small firms experience worse. Miller’s investment strategy explains his good performance to a small extent but most of his success in beating the market was luck and market timing. His portfolio is diversified compared to an individual stock portfolio. He buys and holds stocks with a turnover rate of 9% compared to a typical fund’s turnover rate of 85%. He usually holds on to winning stocks unless he decides to buy new names. Miller isn’t afraid to take an extensive position in a company by making big bets and instead of keeping transaction costs low he charges a 1.68% expense ratio. It won’t be easy to sustain Miller’s historical performance in the future. His strategy includes buying low-price, high intrinsic-value stocks and researching areas of the market that look the least

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