Does anyone have a fav fund or two LOOKING FORWARD ”
Started to nibble at hstrx. “
Not a bad pick if you can buy NTF. There’s a fee at Fido. I looked at that one yesterday and was surprised it hasn’t done better this year with both gold and bonds having a decent year. Your question doesn’t define the time frame. For most nowadays a year seems an eternity. Some have much shorter and will eject after a month or two or three when a fund heads south.
I must not have any favorites because I have 20 different holdings. The largest 4 come in at 10% of portfolio each. They represent different variations on alternative and asset allocation type funds where I’m most comfortable at my age. While each could loose 5 or 10% in a terrible year, as a group they are fairly stable - very much “set it and forget it” type holdings. I rationalize a somewhat expensive L/S alternative by considering the overall cost of my funds and also by holding a few individual stocks to reduce costs.
You mention EM funds. I have a very small 1-2% hold in one. Bought in at the depths last year, so it’s already gained some. Before it gets back to any kind of reasonable valuation I will sell and roll the $$ into a broadly diversified balanced fund at the same house. In that case you’re paid to wait because by most accounts EM valuations are still compelling. I have a very small 2% bite on SPDN - an 1X inverse S&P. That’s to moderate volatility on down days. I think there are many other areas that will perform much better than the S&P over the next several
years. With that inverse offset it allows taking on a bit more risk in other areas. International funds plus a few individual
socks stocks are some I like. Japan is a long-shot. But exposure there might add a bit of diversification relative to domestic markets.
Inserted later - Non dollar-hedged Japan adds a currency play. I suspect that’s the better way to go at this point. Check back in a year.
Whoever said PRPFX in
@MikeM’s thread made good sense to me. With some funds, throw away the performance numbers and look at what’s inside. If you see a case for precious metals, foreign currencies, real estate, and some AAA government bonds for defense in the future you might like the fund. I do. Albeit, some criticize it saying fees are too high for what amounts to a passive investment approach.
Do others have a favorite fund, or two? BIAWX and POAGX although the last 2 years of performance are giving me pause.
Morningstar charts not working I have to ask since this tropic comes up often. Why does a Schwab or Fidelity person, which I think a majority of us are, care about M*? There are pretty good tools in each brokerage. And for fund analysis, MFO is "really" good. Maybe the best if you have Premium. I haven't used M* directly in years. Am I missing something?
You get what you pay for.
I find their FundInvestor/ETFInvestor newsletters, mutual fund reports, and X-Ray to be of value.
M* Investment Research Center (provided by local library system) is my portal for these products.
Morningstar charts not working I have to ask since this tropic comes up often. Why does a Schwab or Fidelity person, which I think a majority of us are, care about M*? There are pretty good tools in each brokerage. And for fund analysis, MFO is "really" good. Maybe the best if you have Premium. I haven't used M* directly in years. Am I missing something?
You get what you pay for.
I'm using Premium, but not paying. Morningstar today leaves a lot to be desired. But give them an extra day or two, and their numbers most often catch-up to reality. At this point, I continue to use Morningstar because of the convenience of knowing my way around the website. I can quickly navigate to the particular item I want to look at. There ARE some factoids which M* includes, which I never see elsewhere--- like the rank among peers in terms of the performance of Fund X, whatever fund it is that you're looking at. ...Ah, but there are often mismatches: Morningstar slides Fund A or B or C in together with other funds where it doesn't truly
belong.
Nothing's perfect. They really have screwed up their own charts. Klunky, not user-friendly. "Progress." "New and Improved." Crap.
Do others have a favorite fund, or two? The funds that I'm absolutely happy with and most comfortable with and favor the most are PRWCX and JHQAX. They have been consistent over the years and two funds I don't worry about. They together make up about 35% on my self-managed portfolio.
Do others have funds they just don't worry about in good times and bad? Faves?
Morningstar charts not working I have to ask since this tropic comes up often. Why does a Schwab or Fidelity person, which I think a majority of us are, care about M*? There are pretty good tools in each brokerage. And for fund analysis, MFO is "really" good. Maybe the best if you have Premium. I haven't used M* directly in years. Am I missing something?
You get what you pay for.
TCAF, an ETF Cousin of Closed Price PRWCX @MikeM - Fair point. Perhaps it’s just coincidence that the name TRP selected for the new offering is:
”Capital Appreciation Equity ETF” and that David Giroux will manage it. Personally, for long time
core equity holdings I prefer good actively managed mutual funds with a stable investor base. That said, I’ve used a couple different actively managed bond etfs and the ability of investors to move in and out didn’t seem to hurt their performance much. And I use one equity
index etf - but rarely trade it.
Hope this goes well for TRP and their investor base. ISTM Price has experienced heavy outflows in recent
years.
Expense ratio on Schwab's MM fund, SWVXX Not sure why I didn't pay attention to this before, but I never bothered to look at the expense ratio of the Schwab MM fund, SWVXX. It's 0.34%. The 7day yield given is 4.49% but with an added stipulation, 7 day yield with waivers. So, is the actual "net yield " actually 4.49-0.34 = 4.15% after expenses? Or, is the expense ratio known as "waivers"?
I'm assuming the Fidelity MM fund has the same connotation, with waivers(?)
Which now has me thinking, a couple years ago when rates were measured in fractions of a percent, 0.1, 0.2% yield, were we actually losing money being in this fund?
Fed Watch
WASHINGTON (AP) — The Federal Reserve extended its year-long fight against high inflation Wednesday by raising its key interest rate by a quarter-point despite concerns that higher borrowing rates could worsen the turmoil that has gripped the banking system.
“The U.S. banking system is sound and resilient,” the Fed said in a statement after its latest policy meeting ended. At the same time, the Fed warned that the financial upheaval stemming from the collapse of two major banks is “likely to result in tighter credit conditions” and “weigh on economic activity, hiring and inflation.”
The central bank also signaled that it’s likely nearing the end of its aggressive streak of rate hikes. In its statement, it removed language that had previously said it would keep raising rates at upcoming meetings. The statement now says “some additional policy firming may be appropriate” — a weaker commitment to future hikes.
The Fed included some language that indicated its inflation fight remains far from complete. It noted that hiring is “running at a robust pace” and “inflation remains elevated.” It removed a phrase, “inflation has eased somewhat,” that it had included in its statement in February.
Speaking at a news conference Wednesday, Chair Jerome Powell said, “The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy.”
The latest rate hike suggests that Powell is confident that the Fed can manage a dual challenge: Cool still-high inflation through higher loan rates while defusing turmoil in the banking sector through emergency lending programs and the Biden administration’s decision to cover uninsured deposits at the two failed banks.
The central bank’s benchmark short-term rate has now reached its highest level in 16 years. The new level will likely lead to higher costs for many loans, from mortgages and auto purchases to credit cards and corporate borrowing. The succession of Fed rate hikes have also heightened the risk of a recession.
The troubles that suddenly erupted in the banking sector two weeks ago likely led to the Fed’s decision to raise its benchmark rate by a quarter-point rather than a half-point. Some economists have cautioned that even a modest quarter-point rise in the Fed’s key rate, on top of its previous hikes, could imperil weaker banks whose nervous customers may decide to withdraw significant deposits.
The above was excerpted from a current
Associated Press article, and has been edited for brevity.
Sell all bond funds? If you look at a fund's average duration, theoretically for every 1 year of duration, the fund should fall one percentage point for every one percentage point increase in interest rates. So, if a fund has a duration of six years, and rates rise from 0% to 4%, the fund's bond portfolio should fall 24%, maybe 20% overall if you factor in the yield. I think most people just aren't used to a rising rate environment. Bond investors have just had it good for so long, they didn't realize the risks. I would add that if the Fed had raised rates more gradually, funds would've had more time to adapt to the new environment, but Fed Chair Powell wanted to send consumers and labor a message by raising rates quickly and aggressively: "I'll teach you not to ask for higher wages and buy stuff!" Now imagine you're a certain California bank making highly leveraged bets on the same bonds in your fund portfolios you thought were safe.
Sell all bond funds? Not a bad strategy, but it’s a mistake to compare past performance to future expectations as in “I don’t own a single bond fund that can come close to that over the past five years and only one that tops that over 10 years.” It’s the next five- and ten-years that matter, not the last ten. Moreover, if you had held a CD 10 years ago until today, you wouldn’t have received 5.34% annualized either, closer to zero I bet as much of that period rates were considerably lower. So, you must look at the forward yield and credit quality of bonds today and compare them to the forward yield and credit quality of CDs with comparable maturities. I also think the fact that the CDs you mentioned are callable is problematic. If rates go lower, your yield disappears.
Sell all bond funds? I realize that bond fund returns go up and down, but their abysmal long-term returns after the past year or so are astonishing. With CD yields so high right now, why not just ditch bond funds and put all the money in CDs? I can construct a 5-year CD ladder at Fidelity with every issue exceeding 5% and an overall yield of 5.34%. Jeez … I don’t own a single bond fund that can come close to that over the past five years and only one that tops that over 10 years. How many years would it take my bond funds to earn as much as this simple CD ladder? Answer: a lot.
The only fly in the ointment is that few of the higher yielding CDs are call-protected, so if yields drop a lot, I suspect that many of these banks will be calling in their CDs.
Vanguard Said to Shutter Business in China, Exit Ant Venture AS reported in Barron's this week (my summary below,
LINK),
JPM is going into China,
"Mary ERDOES, JPM. RISK management in banking is essential. 3 recent bank failures (Silvergate, SVB, Signature) were partly from weaknesses in risk controls. The banking system as a whole is in much better shape now than during the GFC 2008-09 – the loan/deposit ratios are low; the capital ratios are high. There is much higher regulatory scrutiny for the systemically important banks (SIBs) than for smaller banks and may be new regulations can address that. Chances for US RECESSION are high (65%) and JPM is prepared; some sectors of the economy such as housing may be in recession already. FED’s path to +2% average inflation won’t be easy or smooth. After the disaster last year, the 60-40 portfolios look attractive for these volatile markets. ALTERNATIVE investments are fine for those who can take higher risks, but don’t overdo those as some university endowments have done. DIVERSIFICATION is useful but keep in mind that diversified mixes evolve; problems arise when investors get stuck on some fixed diversification mixes. HOME-COUNTRY biases are strong in the US but are everywhere. The ESG is in flux, and it is important to provide the asset managers the leeway on ESG. JPM is using AI for security and fraud prevention.
CHINA is challenging but important; even if you are not in China, it will affect your investments. After 100+
years in China, and lots of efforts there, JPM can now own 100% of its joint-ventures and it has big expansion plans targeted for the Chinese population. But JPM stays away from the politics of the US-China relations. JPM sent a delegation to UKRAINE in February because JPM is #1 debt issuer for Ukraine; it gave Ukraine 2-yr payment deferrals after the war started; it will also be involved heavily in post-war reconstruction and redevelopment (and some thought that JPM was pulling a stunt with its Ukraine trip)."
Vanguard Said to Shutter Business in China, Exit Ant Venture Excerpt from Bloomberg,
A complete retreat would follow Vanguard’s surprise move two years ago to scrap plans for a mutual-fund management license in China to focus on the BangNiTou tie-up with Ant that was launched in 2020.
Fidelity and Neuberger Berman Group have recently joined BlackRock in launching onshore funds through new wholly-owned units, while Manulife Financial Corp., JPMorgan Chase & Co. and Morgan Stanley have gained approvals to buy out local partners to gain full control of existing ventures.
The race for fund advisory is heating up with more players coming in, hurting profitability. Vanguard’s venture, which has been offering only products from competitors, booked a loss in 2021 that was much higher than an internal forecast made after it was set up in 2019, Bloomberg reported last year. Vanguard owns 49% of it.
https://bloomberg.com/news/articles/2023-03-21/vanguard-plans-to-shutter-business-in-china-exit-ant-jv?srnd=premium-europe&leadSource=uverify%20wall
401-K: To Rollover Or Not To Rollover There are too many variables and possibilities for me to write up a complete description let alone an analysis right now. Difference in tax rates post-retirement, number of years until retirement (at which point you should switch to IRA since the 401(k) then offers no more deferral of RMDs), number of anticipated years of life (not IRS tables), type of beneficiary (spouse or other), expected rate of return (and variability of returns).
Broad picture - the more your tax rates drop in retirement the better off you are in keeping the money in the 401(k), since that will avoid RMDs until they're taxed at the lower rates. That tax savings can more than compensate for the extra fees in the meantime.
If there's no change in rates, the picture changes. Each year you pay $8K in taxes using the IRA, meaning you have $8K less earning returns. Keep the $500K in the 401(k) and you have $4800 less due to fees that can earn returns. So you've got about $3.2K more with the 401(k) sitting there earning returns.
But while the $4800 loss to fees in the 401(k) is permanent, the loss of an extra $8K in taxes with the IRA is temporary. Keeping the money in the 401(k), sooner or later, you'd still withdraw the $20K, post-retirement, and pay the $8K in taxes then.
I don't have the time right now to delve more deeply into this. Gut feeling is that a sizeable post-retirement reduction in tax rates would justify keeping the money in the 401(k). Otherwise, moving the money to the IRA may come out better.
Janet Yellen to Reassure Bankers NO BANK is totally immune to a run in deposits. It's simply the innate nature of the beast. It's a bug, not a feature, and this is not a secret.
From Matt Levine, in his Bloomberg
Money Stuff column:
Banking is a confidence trick. You put money in the bank today because you are confident you can take it out tomorrow; to you, a dollar that you have deposited in the bank is just as good — just as much money — as a dollar bill in your wallet. If you show up at the ATM at any time of day or night, you expect it to give you your dollars.
But the bank doesn’t just put your dollars in a box and wait for you to take them out; the bank uses its depositors’ money to make loans or buy bonds, and just keeps a little bit around for people who need cash. If everyone asked for their money back tomorrow, the bank wouldn’t have it.
But everyone is confident that, if they ask for their money back tomorrow, the bank will have it. So they mostly don’t ask for it, so when they do, the bank does have it. The widespread belief that banks have the money is what makes it true.
This is obvious stuff. Also obvious, and famous, is that it is an unstable equilibrium. If people stop believing it, it stops being true. If everyone stops believing in a bank, they will all rush to get their money out, and the bank won’t have it, and their lack of belief will be retrospectively justified. Whereas if they had kept believing, their belief would also have been justified.
Isn’t this ridiculous? But there is a deep social purpose to the confidence trick. Banking is a way for people collectively to make long-term, risky bets without noticing them, a way to pool risks so that everyone is safer and better-off.
You and I put our money in the bank because it is “money in the bank,” it is very safe, and we can use it tomorrow to pay rent or buy a sandwich. And then the bank goes around making 30-year fixed-rate mortgage loans: Homeowners could never borrow money from me for 30 years, because I might need the money for a sandwich tomorrow, but they can borrow from us collectively because the bank has diversified that liquidity risk among lots of depositors.
Or the bank makes small-business loans to businesses that might go bankrupt: Those businesses could never borrow from me, because I need the money and don’t want to take the risk of losing it, but they can borrow from us collectively because the bank has diversified that credit risk among lots of depositors and also lots of borrowers.
But the basic problem remains: the confidence trick, where trust in banks makes them trustworthy and distrust in banks makes them fail.
Bankers and bank regulators tend not to talk in these terms... because talking about it ruins the magic. But they know it in their bones; at a deep level they understand that preserving that confidence is their most important job.
More specifically they know that if there is a run on a bank, and that bank goes bust and doesn’t pay depositors, then there will be a run on other banks. And they know that the run can start with a bank that is bad, that is undercapitalized and made poor decisions and in some sense deserves to fail, but that it can spread to other banks that are good.
And they know that “good” and “bad” are not really the things that matter: What makes a bank good is not just its capital ratios and liquidity position but also confidence, and however good the ratios it is hard for a bank to survive a loss of confidence. They know that they are all interconnected, that they are players in an essentially social game, and that the goal of the game is not to win but to keep playing.
The above are edited excerpts from Matt Levine's Money Stuff column of March 17, 2023. Text emphasis has been added.
Just noticing such tremendous VOLATILITY in the Markets, "that is all." @larryB- thanks much. Like you, minimalist on vehicles/keep forever.
Years ago AAA had an inspection service that would certify a vehicle for a buyer or seller, and you could trust them. Haven't heard about anything like that in a long time.
PIMCO and Invesco Among Biggest Losers in Credit Suisse AT1 Bond Write Down +1 Invesco bought Oppenheimer several years ago. Some of the excessive risk taking in fixed income appears to have come along for the ride. Relieved to have so little with them at this point. Suspect one fund I still own may have been adversely affected. A year ago it surely would have hurt quite a bit more. Hope somebody publishes a list of which specific funds got hammered / degree of exposure each had to these ”idiot bonds.”
I’ve added a story to the OP which cites Lazard and Fidelity among those with substantial holdings in these bonds.
Just noticing such tremendous VOLATILITY in the Markets, "that is all." I like to sleep well at night. 10 years in bucket #1 is the best sleeping aid.
My allocation model is so fragmented & complicated that I fall asleep at night just trying to figure it all out.
Great sleep inducer.
I’ve been burned more than once on used cars, Usually buy new. Then I know what I’m getting. There’s an old expression that when you buy used you’re “Buying somebody else’s problems.”
