A reader on the Mutual Fund Observer Discussion Board asked “how do you feel about putting monies into funds that have a somewhat ‘black box’ dynamic to them…yes, they explain their positions but sometimes I wonder, how safe of an investment are some of these funds?”
Since retiring two months ago, I purchased the actively managed Fidelity New Millennium ETF (FMIL) for diversification. It is one of four actively managed equity ETFs offered by Fidelity that has more than $50M in assets. My introduction to FMIL came from an article by Tezcan Gecgil, “3 Fidelity ETFs To Diversify Your Portfolio In August,” at Investing.com, in which she highlighted that FMIL has done relatively well year-to-date. I then read “ETF of the Week: Fidelity New Millennium ETF (FMIL)” by Aaron Neuwirth from VettaFi, formerly known as ETF Database, which summarizes a podcast by ETF Trends CEO Tom Lydon in “ETF of the Week” with Chuck Jaffe Continue reading →
Medieval world maps were speculative documents, incorporating what the cartographer knew to be true, but that often left a lot of blank space on the map. The places where the mapmaker could offer only uncertain guidance were marked with the Latin legend “Hic sunt dracones.” That is, “here be dragons.”
To be clear, these were not stupid or credulous guys. They were just guys who knew the world was a dangerous place, and the uncharted regions were Continue reading →
I am now in my fourth week of retirement. This article is the third of a three-part series describing my experiences as I retire. It builds upon “Certainty of Death and Taxes,” where I describe how taxes, social security, and Medicare may impact retirement financial plans. The topics covered in this article are:
- Investment Environment: A recession is becoming more likely in 2023
- Sequence of Return Risk: How a recession early in retirement can damage retirement plans
- Tax Efficiency: Optimizing lifetime after-tax retirement income
- Withdrawal Strategy: Using a basket of accounts to reduce taxes
- Investment Strategy: The extended Bucket Strategy
“Things as certain as death and taxes can be more firmly believed” was written by Daniel Defoe in “The Political History of the Devil” in 1726. Benjamin Franklin wrote, “In this world, nothing can be said to be certain, except death and taxes” in 1789. Few subjects I have written about elicit such a passionate response as “Roth Conversion” and “Deferring Social Security Benefits.” This article is the first of a three-part series describing Continue reading →
By the time this article is published in Mutual Fund Observer, I will have been retired for one day as I near my 67th birthday. I spent 25 hours this past month listening to audiobooks about the psychology of retirement and an equal amount of time searching the internet for ideas generated from these books. I concluded that I should ease into retirement and plan on what to do for the next 365 days, sometimes called the Retirement Honeymoon Phase. This article is the second of a three-part series describing my experiences as I retire. Continue reading →
The Federal Reserve is raising rates to slow the economy, reduce inflation, and reduce bond purchases (Quantitative Tightening). The International Monetary Fund and World Bank are lowering forecasts of global growth, and the Russian invasion of Ukraine is further disrupting supply chains and raising geopolitical tensions. I am at my neutral allocation of 50% to stocks but have shifted away from the most volatile funds and toward more defensive funds that do well during the late stage of the business cycle and higher inflation. This article describes Continue reading →
I have expressed my intention to retire in the next few months with the specter of stagflation looming. I have studied the 1960s to 1970s stagflation period since I lived through these times and know that they are secular. Federal Reserve Chairman Jerome Powell recently described the potential for inflation to last for an extended period of time:
…the risk is rising that an extended period of high inflation could push longer-term expectations uncomfortably higher, which underscores the need for the Committee to move expeditiously as I have described. (Powell Says ‘Inflation Is Much Too High’ And The Fed Will Take ‘Necessary Steps’ To Address,” CNBC, 3/21/2022) Continue reading →
Risk is defined as “the possibility of loss or injury” by the Merriam-Webster Dictionary and volatility as “a tendency to change quickly and unpredictably.”
Risk refers to the possibility of loss, which is outcome focused. Volatility refers to a quick, unpredictable change, which isn’t centered on the outcome. To be a good investor, a person must be able to differentiate between these. Volatility acts as noise, while risk is worth paying attention to.
– The Difference Between Risk And Volatility, Investopedia, Judy Hulsey
I continue to expect a regime change from mid-cycle to late-cycle later this year and look for opportunities to reduce exposure to riskier assets from my current 55%. Fourth-quarter nominal gross domestic product is up 11.8% compared to a year ago with the consumer price index up 7.5% for a real (inflation-adjusted) gross domestic product of 5.6%. Inflation, valuations, geopolitical risks, and volatility are Continue reading →
“Oh, you can’t help that,” said the Cat: “we’re all mad here. I’m mad. You’re mad.”
“How do you know I’m mad?” said Alice.
“You must be,” said the Cat, “or you wouldn’t have come here.”
– Alice in Wonderland, Lewis Carroll
At the time of this writing, the S&P 500 has fallen 7.8% year to date. Some respectful sources point to retail (small) investors panicking. Alice, the Mad Hatter, and I are not so sure. There are those who believe they can time the markets and are trying to jump ahead of the falling market before the rest of the crowd. Then some investors have the financial acumen to make quick, intelligent decisions. Should you sit back and ignore the volatility, buy the dip or sell the news? Continue reading →
The Mutual Fund Observer writes for the benefit of intellectually curious, serious investors— managers, advisers, and individuals—who need to go beyond marketing fluff, beyond computer-generated recommendations, and beyond Morningstar’s coverage universe.
The quote above had a big impact on me in July 2019 when I was first introduced to Mutual Fund Observer, and I became its most enthusiastic fan. I began contributing to the monthly newsletter shortly thereafter. I appreciate the efforts that have gone into creating and maintaining MFO by Professor Continue reading →
I love reading the monthly discussions from Mr. Bolin. He is providing very useful information month after month. They’re always so insightful and analytical, yet it can be difficult to construct a portfolio because each month brings some new funds and different analyses. It would be very useful if he would have some specific portfolios and update recommended changes when he thinks it’s necessary. This month’s catastrophe portfolio is compelling, and one I may invest in for the long term. As a retiree of many years, it’s just what I want.
– MFO Discussion Board by golub1
I share a personal traditional IRA at Fidelity that I have constructed following Fidelity’s business cycle approach heavily influenced by the risk management philosophy from Mutual Fund Observer. Each investor’s needs are different, and this portfolio is Continue reading →
I divide my investing strategy into the low cost, buy and hold philosophy following that of Vanguard, and its founder, John Bogle, along with Charles Ellis, and the more active business cycle approach of Fidelity, Benjamin Graham, Howard Marks, and Ed Easterling, with a touch of trend following from Gregory L. Morris using a risk-managed approach of Mutual Fund Observer, the bucket approach of Morningstar, and the tax strategy that I learned late in life. Whew! This article Continue reading →
This article takes a closer look at Fidelity Advisor Multi-Asset Income (FMSDX/FAYZX), Fidelity Strategic Real Return (FSRRX), and Fidelity Advisor Strategic Income (FADMX/FSIAX) which I have identified in previous articles as funds with high risk-adjusted-performance. They are managed by Adam Kramer, Ford O’Neil, and a strong team of co-managers.
This article continues the theme from the long-term trends identified in Retrospection Is a Hard Metric to Match. Recently Lance Roberts wrote Deficit Deniers & 40-Years of Economic Erosion covering the same 40 year period but emphasizes Continue reading →
What if you had to build a portfolio now and could not change it for the next five years other than annual rebalancing? The most obvious real-life situation might be preparing in case a spouse who does not know much about investing needs to manage finances; hence the name, “Catastrophe Portfolio”. A different scenario is the Rip Van Winkle scenario where you fall asleep for five to ten years and wake up to see what your portfolio is worth. And of course, there is the K.I.S.S philosophy.
The obvious question would be, “Why not use an investment advisor and/or an independent financial planner?” I have talked with Continue reading →
I turned 66 last week and bought a retirement home in Colorado last month. By most measures, I am prepared for retirement with pensions, social security, and savings. I continue to work for several reasons including the uncertainties of markets facing seismic shifts. In the 50 years since I was in high school, so much has changed, both good and bad. These secular trends that have occurred in my life have significance for young and old investors. As Bear Bryant said, “Offense sells tickets, but defense wins championships.”
In Section #1 I look at seven long term trends that will Continue reading →
Correlation measures the relationship between two assets such as stocks and bonds and has a value of +1.0 for two assets that are perfectly correlated and -1.0 for two assets that move in the opposite direction. The most common example of correlation is that the S&P 500 has a correlation of about zero to US Bonds. The balanced 60 stock and 40 bond portfolio is familiar to investors as a way of building a portfolio of these two uncorrelated assets. In this article, I search for Continue reading →
Momentum is contrasted with “Buy and Hold” to develop a Tactical Sleeve. The objective is to increase risk-adjusted returns and benefit from the evolving business cycle.
I have written articles on Mutual Fund Observer about investing according to the business cycle, fund rotation, and trend following as well as finding funds that manage risk over the complete business cycle. As an individual investor nearing retirement, I like to evaluate Continue reading →
One Stop Mutual Funds with Good Multi-Year Metrics (CTFAX, FMSDX, JABAX, PRSIX, RBBAX, TRRIX, VTINX, VWINX)
As I imagine retirement in a few years here, my personal investing goals have been to simplify. I built my Ranking System around MFO Metrics to determine the best funds for a conservative investor nearing retirement considering long-term performance, momentum, consistency, downside volatility, risk-adjusted returns, quality, and income. These funds are in line with my preference to have Continue reading →
VictoryShares Enhanced Volatility Weighted ETF (CDC), a Great Owl with an Eye on Volatility
Each month, I sift through funds in my Ranking System, as well as trending funds, using the Mutual fund Observer MultiSearch screen. I search for high risk-adjusted returns across many asset classes for diversification. In March, I discovered VictoryShares Enhanced Volatility Weighted ETFs right under my nose. In this article, I look at the difference between low volatility funds and funds with high-risk adjusted returns.
This article is divided into sections for those who wish to Continue reading →