BUY.....SELL......PONDER January 2020 Hi, guys. We needed a small chunk just for the down-payment on a car, after just getting here. The best available option was to take the $$$ from my best performer: PRWCX, which I've owned since 2013. Along with just a few other TRP funds, it's in my T-IRA. My wife has money in a 403b, but taking the needed cash from her 403b account would mean paying an early-withdrawal-penalty, too. Our income will surely not create much, if any, tax due. I'm not worried about that. I won't be working. (And it makes me SO happy to say that!) And she'll work just part-time.
Your logic in recommending the Roth to us is flawless. But we simply don't have much money invested anywhere that's NOT in a tax-sheltered account. We plan to do a direct rollover into an IRA for HER, with that 403b from her former job. After taking the $4,000 from my T-IRA for the car already in 2020, I don't want to add almost $10,000 more in income (her 403b) from there, too. Add to all of this, the fact that my reaction to all of the tricky, obtuse, crazy, arcane, absurd IRS tax rules leaves me just not wanting to jump through all those bullshit hoops. We already have enough current income to get by just fine...... THANK you all for the guidance and concern. :)
*This is unrelated, I suppose: My bond funds are now generating about $300 per month, and that may turn out to be very useful. Those funds are PRSNX, RPSIX (in T-IRA) and PTIAX in a regular, taxable, joint investment account. It's always been my Ace-in-the-hole to use those monthly dividends IF the money turns out to be needed, after all. That way, I can take advantage of the pay-outs without shrinking the size of my pie.
* "Gary1952">dtconroe, I did purchase NVHAX with proceeds from an equity fund that had doubled. This is in my taxable account so I wanted to get some muni exposure and protect my profit. I was considering BTMIX but decided to go a little more aggressive. I read the your objection to the 2015 drawdown. But I have decided to pick funds with good potential and stick with them for a period long enough to prove me wrong. I will not need that money for a few years for monthly spending. I will review the performance at end of this year to see if it makes the grade for next year.
Hey Gary, I understand your reasoning. NVHAX performance since 2015/2016 is excellent. Hope it works out well for you.
Biggest bang for your buck: 8 equity funds with the best capture ratios over the entire market cycle My instinctive reaction was that this is not much different from alpha. Since capture ratios (upside capture ratio and downside capture ratio) are just betas over restricted regions (upside and downside), one would expect alpha to be around zero if the upside and downside capture ratios were the same.
That is, it wouldn't matter if a fund were twice as volatile or half as volatile as its benchmark. If it correlated well with its benchmark, it would be adding no value (alpha). The more value it added, the more the upside capture ratio would exceed the downside ratio.
Admittedly there are many paths to a given upside capture ratio. An upside ratio of
100% can be achieved with a beta of 80% and an alpha of 20(%) to get back to
100%. Or you can get there with a beta of
100% and no alpha. Or with a beta of
120% and an alpha of -20.
See the column linked below.
According to that column, it turns out that despite potentially different paths to the same capture ratios, there's a strong correlation between alpha and {upside capture ratio} minus {downside capture ratio}. The column examines the difference rather than the quotient of upside and downside capture ratios. Nevertheless I expect that either way, difference or quotient, the end number will correlate well with alpha. (Perhaps quotient might correlate better with log alpha? Have to think this through some more.)
https://www.pionline.com/article/20180628/ONLINE/180629854/commentary-up-market-capture-minus-down-market-capture
However, because of the way statistics are calculated, comparing a strategy's up-market capture to its down-market capture provides little, if any, information beyond knowing that the strategy outperformed its benchmark on a risk-adjusted basis. ...
The difference between up-market capture and down-market capture ratios is highly correlated with unconditional alpha, and is not correlated with strategies' market timing performance or defensive properties. Therefore, investors should not consider the difference between up-market and down-market capture as an additional indicator of manager performance.
If you want to calculate your own capture ratios, here's a page that explains the formulas and provides a template spreadsheet. All you have to do is plug in monthly return figures for the fund and benchmark of your choosing.
https://breakingdownfinance.com/trading-strategies/upside-downside-capture/
Biggest bang for your buck: 8 equity funds with the best capture ratios over the entire market cycle I think you have the math backwards in the second sentence of the original post. You've written downside/upside which would get you 0.895 for the DSENX example. I think you mean upside capture divided by downside capture (upside/downside = 1.12).
Biggest bang for your buck: 8 equity funds with the best capture ratios over the entire market cycle Hi, David.
I simply set the screener using three parameters:
Category - 12 styles (LCV, etc) plus Equity Income, Aggressive Allocation, Flexible
Universe - mutual funds or ETFs
Display - full cycle 5
You get a warning that there are 1400 resulting funds and the list will be truncated to the 1000 with the highest APR unless you add criteria. I just accepted the top 1000.
On the results screen, I scroll over to "Capture SP500" and click. That sorts them by that criterion.
When I shift to a six-year display (because DSENX is 6), it is more or less 70th on the list.
DoubleLine Shiller Enhanced CAPE DSENX
Capture 1.12
Downside capture 102
Upside capture 114
APR 15.0
Does that help?
David
