This is a link less post. One advice I gleaned from reading "Winning With Liquid Alternatives" was that one should allocate anywhere from 10-30% of their portfolio towards these kinds of investments. This may not be hard to do as not only new funds are coming out all the time but older funds are changing their prospectus to allow some investing in this arena.
So I pose the question to the MFO universe. How much of your portfolio do you plan or, How much of a portfolio should you plan to invest in liquid alternative offerings?
Comments
No alt's on this house's shopping list.
My meddling may cause enough portfolio damage; let alone my meddling within someone else's meddling, too; and we both get it wrong. And, yes; there will be a few winners here and there, but how to choose today, who would be the winner(s) going forward?
Catch
http://www.ft.com/intl/cms/s/0/f508d770-3832-11e4-9fc2-00144feabdc0.html
http://www.bankrate.com/finance/investing/are-liquid-alternative-mutual-funds-worth-it.aspx
http://dailyalts.com
Thanks for the link to dailyalts.com. Looks interesting, and I have bookmarked this site.
Right here, right now, with domestic equities fully valued, developed foreign equities in a definite funk, and interest rates destined to increase over the next 12 months, I would have no problem owning a 10-20% position in Alts -- as long as they continue to perform. At this time, we own a 10% position in PQTIX (investor ER 1.15%), and I am considering the purchase of a 10% position in QLEIX (investor ER 1.39%).
@Junkster
Conditions like 2008 will inevitably occur in the future, and just like in 2008, common investors like us -- who likely overestimate our abilities -- and the "professionals" will be caught by surprise.
I continue to think that investors can obtain adequate downside protection with a wise mix of relatively low-cost equity, balanced and bond OEFs/ETFs, such as: MOAT, RPV, SCHD, VDIGX, VASVX, VSTCX, VMNVX, SPLV, EFAV, TOLSX, GLFOX, DODGX, DODFX, DODWX, DODBX, PRWCX, VWENX, HBLIX, WHGIX, VWIAX, PIMIX, PIGIX, MWTIX, DBLFX, DBLTX, DBLEX and RSIVX . But I remain open to relatively low-cost alternative funds, such as PQTIX, QLEIX, AQRIX, LMAPX, CRUMX, and even BG's JUCIX. As for the Alts, I am willing to be very, very patient, and track and track, and resist the temptation to be an early investor, but if the Alt fund continues to impress, I am willing to pull the trigger and buy.
Kevin
0%
"Wall Street's New Happy Hour" (from last July)
http://money.cnn.com/2014/07/14/investing/liquid-alternatives/
Is cash a liquid alternative? In that case, I'd guess 5-35% depending on age would be appropriate.
That was the song that came to my mind, too.
Catch
But Joe Schmoo does.....go figure....
"to each his own"
It is already happening in the target date and asset allocation funds that a small portion might be of an alternative nature.
In the end it is up to the investor to make the choice. It should also spur that investor to educate themselves on types of investments including alts.
David has pointed out on more than one occassion in his monthly commentaries that equity markets in general don't appear cheap. One quick take-away from his March 2014 piece: "Hence inflows into an overpriced market." (You barely need read between the lines here to fathom the sentiment.) http://www.mutualfundobserver.com/2014/03/march-1-2014/.
For context, The Dow closed at 16,322 on February 28, 2014.
I try to put things in the widest context possible. I look at the DJI during its late 1990s peak years and find it running in the 9,000-10,000 area (with a close on December 31, 1999 around 11,500). Now, nearly 15 years later, it hasn't yet doubled. So ... by that gage, I don't think we're in an obscenely overpriced equity market here in the U.S. - but not a cheap one either.
There's great danger in numbers. Back in the late 1990s (when TV gave birth to CNBC) with the Dow at 9,000-10,000, a 1,000 point gain would have amounted to more than a 10% increase in value. Recently, with the Dow around 18,000, a 1,000 point gain still garners the same media "hoopla" - but is, in fact, only about a 5% change in value. So, be careful looking at those "ups and downs" and trying to assess changes in valuations.
There's a conventional school of thought which follows something called: "The Rule of 8." Longtime financial commentator Bruce Williams used to refer to it on his radio program. In a nutshell - one's investments should double in nominal value every eight years. One wonders, however, whether in an era of low inflation and 2% yields on Treasuries, that's still a realistic expectation.
If there is an "undervalued" area, it would apoear to be in the commodity related sectors. Returns for Price's New Era (PRNEX), a fund with a solid long term track record, are now in the single-digits going back 10 years. There's plenty of room to run there ... but only if inflation picks up. One question I've been pondering without much success is: What would a fund like PRNEX do in the event of rising commodities prices and a falling U.S. equity market? Watching recent market movements, I suspect a fund like that would hold its own or possibly gain, while the major equity indexes were tumbling. But ...I'm decidedly not sure.
Regards