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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
  • Q&A - Bucket Strategies in Retirement
    Re 7% ... No certainty of course. One reason we enjoy watching markets is the inherent uncertainty day to day. I tossed the 7% figure out only for some perspective on @Crash’s reference to not taking withdrawals after a “down year”. The criticality of Crash’s decision in terms of impact on his portfolio would depend, in part, it seems to me upon the severity of the “down year” as well as the % of savings being withdrawn. And, as I noted, it’s unlikely all the money would be withdrawn at the same time and at exactly at the lowest point in the markets.
    I’m 22+ years retired. Don’t subscribe to any particular cardinal rule on how much to pull out yearly. Varies based on needs and, to a lesser extent, on the fortunes of the markets (Crash’s point). I’d guess it’s about 7% yearly on an average basis. It’s worked well for me, If it works as well for the next 22 years I’ll be 96 - likely too old to care or fully comprehend.
    hank in Other Investing
  • Best No Load and NTF Funds Available at Fidelity

    PRSIX (a 30-50 allocation fund) was listed as one of the top 12 as FMSDX but when I compare the two, FMSDX appears to be the clear winner. PRSIX does have a longer track record but FMSDX has certainly outperformed PRSIX in the last 5 years. I guess PRSIX has a slightly lower ER, though.
    EAPCX - "commodities broad basket" Interesting. I've never owned one of these funds.
    @JonGaltIII Thanks for the input. FMSDX is a great fund and one of my larger holdings. The oldest share class of FMSDX is FAYZX which is still only 5.5 years. My concern for FMSDX is that it has 18% in High Yield bonds. I have concerns about how it may perform during a recession.
    I worry about a 1970's style period of inflation. Home and stock prices are two examples of inflated prices. Food prices are rising. I bought relatively modest amount VCMDX at Vanguard and FSRRX at Fidelity. FSRRX is less volatile than EAPCX. If signs of inflation increase I will consider EAPCX.
    lynnbolin2021 in Fund Discussions
  • Best No Load and NTF Funds Available at Fidelity
    Interesting share. I'm looking forward to reading Charles post further. I'm in a few of those funds. Quick observations on a few of the 12:
    PRBLX seems like a fine fund but it tracks so closely to the S&P 500 Index, why not just invest in an S&P index fund?
    PRSIX (a 30-50 allocation fund) was listed as one of the top 12 as FMSDX but when I compare the two, FMSDX appears to be the clear winner. PRSIX does have a longer track record but FMSDX has certainly outperformed PRSIX in the last 5 years. I guess PRSIX has a slightly lower ER, though.
    PRGSX is a great fund and deserves to be included. It's outpacing my MGGPX this year and with a lower expense ratio. I had a difficult time deciding between the two. Perhaps I should revisit it.
    EAPCX - "commodities broad basket" Interesting. I've never owned one of these funds.
    Really appreciate reading the methodology that Charles shared and how his choices compare to Fidelity Picks and M*.
    JonGaltIII in Fund Discussions
  • How much dry powder to hold in reserve ?
    "...conservatively diversified portfolio...cash and cash alternatives are pegged at 12% of portfolio..."

    I agree with the use of cash or cash alternatives in a portfolio @hank. My point was, and when I hear the term "dry powder", to me that means you are holding cash for "timing" when to buy equities. That is lost opportunity cost.
    Hmmm. Quite right. That always made sense to me. With mutual funds. But with single stocks, I just would not want to pay a price at current high-flying levels to get in, initially. I see not many bargains at all. One (and only one,) lately I've found is BancoMacro out of Argentina. Symbol BMA. What I came across says it's selling at a 19% discount at the moment. So, rather than my favorite Canadian banks, BMA may well be my first single-stock purchase in years, soon.
    Crash Crash in Fund Discussions
  • How much dry powder to hold in reserve ?
    @MikeM - All good points. BTW - always glad to see you posting.
    Investment nomenclature changes. Go back 10-15 years and board participants talked a lot about “stashing away dry powder”, “backing up the truck” and “going all in”. Not sure what’s in vogue today. But it ain’t these.
    Cash rubs a lot of people the wrong way. In its defense I’d make two points.
    - Cash alternatives offer slightly better returns. I’m using TLDTX which carries a lower ER than either Price’s money market or ultra-short fund, invests in government backed paper and maintains a fairly stable value. It’s up 1.28% YTD.
    - If you rebalance periodically, after a bad year for your other holdings you’d be glad to have owned even some “0 return” cash to shift into those now depressed sectors. As a % of your portfolio, cash has increased - even while returning 0%.
    hank in Fund Discussions
  • How much dry powder to hold in reserve ?
    As the article points out, a younger investor might comfortably remain invested 100% of the time (10 of more years away from retirement).
    You're right, @bee!
    I'm humbly corrected.
    Crash Crash in Fund Discussions
  • The Future of Money
    Meaty...
    Let’s begin with the future of money that no one foresaw.
    In 2008, in a wonkish paper that bore no relation to any sci-fi, the enigmatic Satoshi Nakamoto launched Bitcoin, “a purely peer-to-peer version of electronic cash” that allows “online payments to be sent directly from one party to another without going through a financial institution.” In essence, Bitcoin is a public ledger shared by an acephalous (leaderless) network of computers. To pay with bitcoins, you send a signed message transferring ownership to a receiver’s public key. Transactions are grouped together and added to the ledger in blocks, and every node in the network has an entire copy of this blockchain at all times. A node can add a block to the chain (and receive a bitcoin reward) only by solving a cryptographic puzzle chosen by the Bitcoin protocol, which consumes processing power.
    Nodes that have solved the cryptographic puzzle — “miners” — are rewarded not only with transaction fees, but also with more bitcoins. This reward will get cut in half every four years until the total number of bitcoins reaches 21 million, after which no new Bitcoins will be created. As I argued here last November, there were good reasons why Bitcoin left gold for dead as the pandemic was wreaking havoc last year. Scarcely over a year ago, when just about every financial asset sold off as the full magnitude of the pandemic sank in, the dollar price of a Bitcoin fell to $3,858. As I write, the price is $58,746.
    don-t-let-china-mint-the-digital-currency-of-the-future
    bee bee in Other Investing
  • How much dry powder to hold in reserve ?
    As the article points out, a younger investor might comfortably remain invested 100% of the time (10 of more years away from retirement).
    Using Portfolio Visualizer one can back test balance funds such as VBINX or FBALX and analyze their 3 & 5 year rolling returns back to 1994. Their 3-year rolling returns went negative twice (June 2002 - Oct 2003) and (Sept 2008 - Dec 2010). It appears a balance portfolio in retirement might want to avoid withdrawals during these types of time frames. The longest of these time frames being about 2 years. It would seem appropriate to keep two years worth of spending out of the market so that it could be spent during these negative draw down periods. Maybe more if you are strategically trying to use cash to "buy" when the market swoons.
    PV link (click on the rolling return tab)
    bee bee in Fund Discussions
  • April commentary, stock light portfolio version 4.0, 65 years ?
    More about stock light portfolio: I wonder whether solid historic performance of this portfolio is related to gradually decreasing rates.? 40 years ago, in 1981, US treasury yield at its peak was 15.8%. Now it is below 2%. The difference is 14%, which was a tremendous contributor to bond funds returns. One can hardly expect that this trend can continue.
    finder in Fund Discussions
  • Seeking an hourly fee only financial advisor for a small non-profit
    I don't see non-LI contact info there and iirc he had retired from all such activity a few years back
    all I was thinking is that he would know to refer the querier to someone competent
    but yes, I would think vang would be able to help out just fine, and honestly
    I just wanted to see if bobc was around and perhaps still reading threads here ...
    davidrmoran davidrmoran in Other Investing
  • April commentary, stock light portfolio version 4.0, 65 years ?
    Thank you @carew388
    I read David's write and posted just prior to traveling. I should have waited until returning home. I'll ponder the 65 years of history and markets as to how relative this is to the dynamic markets in which we play.
    catch22 catch22 in Fund Discussions
  • April commentary, stock light portfolio version 4.0, 65 years ?
    While historical data is interesting; I reserved any comment until I clarified the "65 years" description in the below quote. What 65 years period?
    Perhaps my 1 year of Covid era sheltering has literally affected my cognitive abilities; a "can't connect the dots anymore" circumstance.
    Thank you @David_Snowball et al, and don't hesitate to point out that I may have begun a cranial-rectal inversion syndrome.
    Stock light version 4.0 MFO, April link
    In the past, 2004, 2010, and 2014, we’re shared research from T. Rowe Price that illustrates the dramatic rise in risk that accompanies each increment of equity exposure. Below is the data from the most recent of those articles, which looks at 65 years of market history, from 1949 to 1913.
    catch22 catch22 in Fund Discussions
  • Treating a Mutual Fund Like an Annuity
    It looks to me VGHCX was a grand slam !!!
    That's assuming investors have the stomach for it. It went through a patch where excluding withdrawals, it dropped 33.17%. How many people would have stuck with it, let alone taken the scheduled withdrawals, which would have increased the drop to 42.88%? And that's just month-to-month calculations. Daily peak to daily trough was likely worse.
    That drop lasted the better part of two years (1 year, 9 months), and the fund took nearly an additional two years (1 year, 10 months) to recover.
    Investors may have had an even harder time sticking with PRWCX: max (monthly) drawdown of 36.61% with no withdrawals, 45.38% including withdrawals. That fall took the same 1 year, 9 months as it did for VGHCX, though PRWCX recovered faster, taking "only" 1 year, 2 months.
    (Some drawdown figures come from the "Drawdown" tab on the PV page.)
    I'm not saying that past results including these bumps in the road aren't impressive, or don't suggest a good likelihood of doing very well by investing aggressively. I am asking, when people do encounter sizeable bumps (even with a small withdrawal rate), whether they will hang on. Unlike using an annuity, they have no guarantee of success with funds: "past performance does not guarantee future returns."
    Unfortunately people have a tendency to bail at the worst times. One will do better by making a plan, any plan, whether it is self-managed retirement, an annuity, target date funds, or anything else and just unemotionally sticking with it.
    msf in Fund Discussions
  • Lots of “100 Club” Funds In March 2021 MFO Ratings Update
    Just posted all updates through March to our MFO Premium site, including MultiSearch, Great Owls, Fund Alarm (Three Alarm and Honor Roll), Averages, Dashboard of Profiled Funds, Portfolios, QuickSearch, Fund Family Scorecard, and Dashboard of Launch Alerts.
    The site includes several other analysis tools: Correlation, Rolling Averages, Trend, Compare, Ferguson Metrics, Calendar Year and Period Performance.
    Glancing through the Honor Roll funds, which represent best performing funds in category based on absolute return for the past 1, 3, and 5 years, you'll find some eye-watering numbers this past year.
    QuickSearch, Great Owls, Three Alarm, and Profiles tools remain available to the public without subscription.
    More of the latest update here.
    Charles Charles in MFO Premium
  • Treating a Mutual Fund Like an Annuity
    Using Portfolio Visualizer's portfolio analysis tool I wondered if the "safe withdrawal rate" data could be used as a substitute for an annuity rate. SWR is a historical data point that changes depending on the historical start and end date. An annuity is a guaranteed income based in part on today's low interest rates. Obviously two different approaches to securing income in retirement. I'd like to consider part of my retirement income being derived from a Safe Withdrawal of stocks, bonds, and alternatives.
    Exploring some older mutual funds (VWINX, VWELX, PRWCX, and VGHCX) I discovered the following SWRs (found within the Metrics tab):
    VWINX = 7.18%
    VWELX = 8.02%
    PRWCX = 9.16%
    VGHCX = an astouding 14.31%
    In other words, for each $1,000 invested in these four funds, each could safely pay out their SWR each year of:
    Year 1:
    VWINX = $71.80
    VWELX = $80.20
    PRWCX = $91.60
    VGHCX = an astounding $143.10 (close to double VWINX's SWR)
    note: the annual dollar amount would adjust based on the annual mutual fund's dollar value at the end of each year:
    Using VWINX's SWR (I set the annual withdrawal of a fixed percent of 7.18%) and I tested all four funds over the past 35 years (back tested from 1986 - 2021). All four survived a 7.18% annual withdrawal. Both VWINX and VWELX ending "cash value" were impacted by inflation. The 2021 (inflation adjusted value) of VWINX being only $567 of its original $1,000 value. Both PRWCX and VGHCX value stayed ahead of inflation while paying out 7.18% annually. VGHCX's value grew four fold over the last 35 year time frame. As a result it paid out larger and larger amounts annually compared to the other three fund choices. While VWINX paid out a pretty steady amount over the 35 year time frame (between $70 - $100), VGHCX's pay outs grew from $70 in year 1 (1987) to over $400 - $600 annually (years 13 - 35).
    Most annuities don't provide inflation riders and many do not offer a cash value upon death. So strictly speaking even VWINX would be a good substitute for an annuity that pays out 7% with a ending cash value of $1,351 (equivalent to $567 back in 1986). The other three funds were an even better "annuity income" choice at that SWR.
    None of these funds busted (went to zero) at this 7.18% Safe Withdrawal Rate. In fact, VGHCX's inflation adjusted cash value was $4,141...four times what was invested back in 1986. In addition, VGHCX provided larger and larger annual income pay outs that kept up with (exceeded inflation). Will the healthcare sector, and more importantly this fund, continue to offer such great performance?
    Here's the link to PV with these four funds. The "Metrics" tab has the data on SWR (Safe Withdrawal Rate). Let me know if you find a fund with a SWR higher than VGHCX (14.13%).
    PV Link
    bee bee in Fund Discussions
  • DIVS article
    "In addition, while DIVS is GAINX, Morningstar has struck all historical data for the fund (and is currently treating DIVS as if it first saw the light of day last week)." - David.
    If true, this could be a problem if trend persists.....I'm surprised it is being handled this way.
    I would think it would be a high concern for a PM to extinguish a good track record over many years by rating services.
    shipwreckedandalone in Fund Discussions
  • Commodities - China Corners Markets
    I decided in February to put a little weight in commodities. Chose a broad basket ETF for that bet, DBC. It's been up and down and I haven't made much on it yet, but I do think there is merit in owning for the next few years.
    MikeM MikeM in Other Investing
  • Two High-Yield CEFs That Never Cut Their Distributions Since Inception
    @Mark I'm not really disagreeing with you about purchasing return of capital at a discount. There is a value to the amplification of the yield from the discount regardless what the source of the yield is. But I do think there is often an intention to mislead investors with managed distributions. Consider why CEFs exist at all. At a discount they can be great investments. But think about the time when they're first issued. Who exactly is buying these CEFs at the IPO at full price and why are they buying them? In fact, it may even historically have been more than full price for CEF IPOs as the issuer and underwriter would charge commissions. In my experience, anecdotal though it may be, new CEF IPOs are sold to not bought by unsophisticated investors, often senior citizens seeking high income for retirement. The fact that the income could come from a return of capital eludes many of them. The ETF is a far more efficient lower-cost mechanism. And I think there is a reason why in recent years there has been a decline in new CEF issuance and especially permanent-capital CEF issues, as opposed to target date ones with a liquidation date that make more sense. The new CEF is generally a ripoff, and the high payouts they have, which lures income hungry seniors, often an illusion propped up by return of capital and/or leverage, which works well on the way up and cuts badly on the way down. By contrast, the deeply discounted CEF can be a great investment, regardless whether its income comes partially from return of capital or not.
    In other words, regarding the aforementioned story this thread began with, UTG maintaining its distribution is far less interesting to me as an investor than what its current discount is to NAV, how well its manager has performed versus its category peers on a total return basis, what its fees are, how much leverage it has, and whether the manager has done shareholder-friendly things like buybacks when the discount is wide. The distribution itself when return of capital is involved becomes a somewhat illusory source of return and shouldn't be the primary selling point.
    LewisBraham in Other Investing
  • Two High-Yield CEFs That Never Cut Their Distributions Since Inception

    If a CEF had 95% invested in one security, it would cease to be a CEF and be in violation of the Investment Company Act. ... In other words, I think this isn't a particularly realistic example of a "constructive return of capital."
    It's a simplifying assumption, not intended as a realistic example. I make similar simplifying assumptions when posting on bond fund statistics. I often reduce the portfolio to a single bond. One can then reach the same conclusion for the general case by summing the demonstrated effect over N securities in the portfolio.
    Side note: I took a quick look through the '40 Act because I wanted to suggest that my example likewise would violate the Act for an RIC. But while Section 5(b)(1) sets min diversification requirements for diversified funds (open- and closed-end), Section 5(b)(2) does not restrict the concentration of nondiversified funds.
    https://www.govinfo.gov/content/pkg/COMPS-1879/pdf/COMPS-1879.pdf
    https://www.sec.gov/investment/fast-answers/divisionsinvestmentinvcoreg121504htm.html
    Can you give some indication of how a highly concentrated fund would violate the Act? I would have thought that FAIRX was similarly in violation for years. (It currently holds 58% in St. Joe, and 18% in cash.) Real question.
    msf in Other Investing
  • Matthews Emerging Asia Fund reorganization into the Asia Small Companies Fund and name change
    MEASX got off to a good start.
    The fund outperformed 98% of its category peers for the trailing three years ending 12-31-16
    (10.9% return) while exhibiting low volatility (std. deviation: 8.91).
    However, it has mostly disappointed investors since 2017.
    MEASX differed from most 'Pacific/Asia ex-Japan Stock' funds.
    It had a relatively small average market cap along with hefty stakes in Vietnam, Pakistan, Bangladesh, and Sri Lanka. M* moved MEASX to the 'US Fund Miscellaneous Region' category sometime in 2020.
    Observant1 in Fund Discussions