Joined MFO Premium - if you haven't joined do it now it's awesome - and wanted to comment on the accuracy of the fund composition data from Lipper. I've noticed many of my funds are way off between what MFO shows and what the actual fund company website shows - especially Cash% and Bond%. For example, IVWAX shows 0.5% Cash on the MFO Premium website and 34.8% Cash on IVA's website. Same for popular PRWCX - 0.0% Cash on MFO and 8% Cash on T. Rowe's website. MFO seems to be lumping the Cash% into the Bond%. I don't think it has to do with bonds that are considered cash equivalents - that would make the Cash% higher not lower. Am I overlooking something simple, or does Lipper have different definitions for fund compositions?

@MrRuffles: For your information, U.S. News & World Report ranking of SCB Mutual Funds.
Regards,
Ted
http://money.usnews.com/funds/mutual-funds/rankings/small-blend?int=af9256

@MJG Oh yes, and I can think of another infamous example of a 3rd and 4th (il)logic chain: :)

I really think the human mind is incapable of escaping this fallacy, it is so hard-wired into our cognitive processes as a species. About all one can do is be on the lookout for it and compensate as needed. And, for crying out loud, be amused by it.
https://en.wikipedia.org/wiki/Conjunction_fallacy

"I am particularly fond of this example [the Linda problem] because I know that the [conjoint] statement is least probable, yet a little homunculus in my head continues to jump up and down, shouting at me—“but she can’t just be a bank teller; read the description.” Stephen J. Gould[1]

(for those familiar with the history of biology, Gould's use of "homunculus" is terribly witty)
Also http://www.fallacyfiles.org/conjunct.html#Answer

When people are asked to compare the probabilities of a conjunction and one of its conjuncts, they sometimes judge that the conjunction is more likely than one of its conjuncts. This seems to happen when the conjunction suggests a scenario that is more easily imagined than the conjunct alone. Psychologists Kahneman and Tversky discovered in their experiments that statistical sophistication made little difference in the rates at which people committed the conjunction fallacy. This suggests that it is not enough to teach probability theory alone, but that people need to learn directly about the conjunction fallacy in order to counteract the strong psychological effect of imaginability.

And for MFOers who don't understand why we'd be prattling on about this, here is a recent mention of this fallacy by Clifford Asness of AQR on his personal blog site; he sounds a bit consternated, no?
https://www.aqr.com/cliffs-perspective/do-not-go-for-the-exacta

Hi Heezsafe,
Thanks very much for your submittal, but especially thank you for reminding me of the Conjunction fallacy. I am familiar with the work of Kahneman and Tversky so I am aware of the Conjunction fallacy, but I failed to recall that its common nickname is The Linda Problem.
I agree with you that we all fall victim to this behavioral fallacy at some time or another; it is a pervasive shortcoming. And yes it does appear on a few MFO posts; it is hard to escape from it if folks don’t think in terms of compound probabilities. Folks seem to resist that discipline.
For example, if you are invited to a financial investment meeting, what is the probability that a casual encounter will be with the money manager presenter if M people are present? The likely answer is 1/M or 2/M. Most folks would know that answer.
Now, what is the likelihood that the person you meet is a successful money manager? Most folks would not know that a high probability correct answer to that question is 0.1/M. Successful money managers are hard to find because they are a rare breed.
The Conjunction fallacy has been captured in many public media. It is often a major part of a movie theme. A terrific example of it is excitingly demonstrated in “The Enemy Below” movie. That film features Robert Mitchum as the destroyer skipper and Curt Jürgens as the submarine commander. It’s the great “he thinks I’ll do this, so I will not, but he knows I will not so…..” 3rd or even 4th level logic chain.
Here is a Link to that 1957 movie trailer:

I agree with the Keynes and the Zweig observation that multidimensional thinking and depth are required when making decisions. However, there is a practical limit and danger in the depth dimension.
Many of us are guilty of over-thinking an investment. Since we never have access to complete information, we often delay and delay a decision until the optimum investment point has passed. We are victim to paralysis caused by too much analyses.
As investors, it is a challenge to decide when enough information is enough to make a reasonable decision. That threshold balance point is hard to define, and likely changes for each decision. Firm rules don’t exist. Investing may seem easy, but is never easy to execute.
I have pontificated far too long. Thanks again for your comments.
Best Wishes.

@Mona: As of 9/30/15 POAGX held 11.53% of it's portfolio in non-U.S. Stocks.
Regards,
Ted

As a longtime AF holder, I am happy with their funds and fairly comfortable with their investment process/management, but these days, knowing what I know now versus 15 years ago, would absolutely refuse to buy more and/or institute new positions if I had to pay a load.
The last AF I purchased was in my 403(b) and a load-free, low-cost R-6 class share.

NYTimes report - the as yet unannounced cost will be 0.1% to 0.2% according to a phone rep (how reliable is that?).
http://www.nytimes.com/2015/11/21/your-money/fidelity-joins-growing-field-of-automated-financial-advice.html

Hi Guys,
This Jason Zweig article is very reminiscent of a very famous John Maynard Keynes story.
Zweig asked “Can you pick the guys who pick the guys who pick the best stocks”. Zweig concluded that “Picking market-beating stocks is hard. Picking the people who can pick market-beating stocks is at least as hard. And picking funds that can pick people who can pick market-beating stocks may be the hardest of all.”
That’s a variation of Keynes’s beauty contest insight. Richard Thaler defined this as an illustration of “third level” thinking. Here is a Link to Thaler’s recent article:
http://www.ft.com/cms/s/0/6149527a-25b8-11e5-bd83-71cb60e8f08c.html
In the Keynes beauty contest scenario, “each competitor has to pick, not those faces that he himself finds prettiest, but those that he thinks likeliest to catch the fancy of the other competitors.” The parallelism is evident.
The referenced article offers more. Thaler summarizes a number guessing game that has the same logic as the Zweig and Keynes insights. You might enjoy playing this single question game. Give it a try.
Various players use differing levels of thinking to arrive at their answer. Thaler presents data from a recent survey that included 583 individual participants.
Richard Thaler observes that “Keynes’s beauty-contest analogy remains an apt description of what money managers do.” The mutual fund manager performance data suggests that these managers would not do well at the Keynes beauty contest game. Investing is not as easy at it seems.
Best Wishes.

The Crowd by Gustave Le Bon published way back in 1895 yet as topical as ever. I really think RPHYX isn't all that bad albeit not my cup of tea. RSIVX I said before is a mediocre fund (actually less than mediocre now) and heavens forbid if Jim Rogers and Carl Icahn are correct in their assessment that something real ugly is brewing in corporate junk debt. As an aside, PONDX which has been mentioned favorably on MFO numerous times, just doesn't seem to get the love that undeserving RSIVX does. PONDX, swelled assets and all just keeps truckin on.
Nice post Junkster. And why all the ink on RSVIX and none on ASHIX that I can recall?
Mona

How about this hidden gem that was un-hidden this week? 1,111 carats...

I received my first yearend mutual fund capital gain distribution this week from Thornburg Strategic Income (TSIAX) in the amount of 2.74 cents per share with a payout date of 11/19/2015. I anticipate receiving about a 3% capital gain distribution on the equity side of my portfolio. If this materializes, then the total distribution (interest, dividends, capital gains) received will be north of 5% on current valuation and better than 6% on amount invested. Thus far, this year, I have been able to have competitive performance with my portfolio's benchmark (The Lipper Balanced Index). Times are now tough for us yield seekers as I can remember my portfolio easily paid out better than 8% ten years ago.

FYI: Call it “the year of mimicking dangerously.”
A handful of mutual funds and exchange-traded funds seek to emulate such leading investors as hedge-fund manager William Ackman of Pershing Square Capital Management. Most of these funds are down 5% or more for 2015, and some have lost at least 10% over the past three months as the embattled drug company Valeant Pharmaceuticals International . and other holdings of top investors have tumbled
Regards,
Ted
http://blogs.wsj.com/moneybeat/2015/11/20/can-you-pick-the-guys-who-pick-the-guys-who-pick-the-best-stocks/tab/print/

@TSP_Transfer: Thanks for the lead on PTIAX. It's an interesting looking company and group of seemingly smart managers. I have much regret about getting into RPHYX and RSIVX after acting on what I read on MFO.

The Crowd by Gustave Le Bon published way back in 1895 yet as topical as ever. I really think RPHYX isn't all that bad albeit not my cup of tea. RSIVX I said before is a mediocre fund (actually less than mediocre now) and heavens forbid if Jim Rogers and Carl Icahn are correct in their assessment that something real ugly is brewing in corporate junk debt. As an aside, PONDX which has been mentioned favorably on MFO numerous times, just doesn't seem to get the love that undeserving RSIVX does. PONDX, swelled assets and all just keeps truckin on.

@VintageFreak If you want an idea of how much Sherman is investing in his funds, you might consult the most recent SAI
http://www.riverparkfunds.com/downloads/SAI/RiverPark_SAI.pdf
It's on page 45.

Just got a note from Fairholme to indicate distribution estimates are available at the link below:
www.fairholmefunds.com/press-releases/
With distributions for FAIRX at a range of $11.55-$12.35 per share, I will be saying goodbye to Bruce within my taxable account. Looks to be 34% + if my math is correct.
press

Here's my response to RSIVX, In My Schwab I R A
Was a $5000.minimum @ Schwab now $100 (see Ted's post here;" Schwab Slashes Minimums On OneSource NTF Mutual Funds"http://www.mutualfundobserver.com/discuss/discussion/comment/71575/#Comment_71575)
PTIAX Buy $100.00 Reinvest Dividends and Capital Gains
Trade Date 11/23/2015
http://www.ptiafunds.com/images/website/documents/fund-documents/ptiax_factsheet.pdf
Another "steady eddie" monthly payer to look @
SCLDX
http://scoutinv.com/resources/documents/literature/factsheet/low-duration-bond-fund-factsheet.pdf?c=1448065575921

FYI: Bill Gross turned to derivatives to make a big bet on emerging-market debt after taking the helm of a Janus Capital Group Inc. fund more than a year ago. One thing he didn’t let stop him: regulatory guidelines that lay out how much fund managers should use them.
Regards,
Ted
http://www.bloomberg.com/news/articles/2015-11-20/gross-doesn-t-let-sec-guidelines-stand-in-way-of-big-bond-bets

@little5bee

The less tinkering I do, the better...the "set-it-and-forget-it" approach appeals to me. I just wonder what the criteria are for selling one sector and buying another...hopefully, at the top!

Have you investigated lazy portfolios? The concept of rebalancing implies not picking at a top, but taking a bit of profit as a position becomes overweighted (sell high), yet "lets its profits run" on the remaining position. The profit taken is then invested in lower performing position as in "buy low". Some links:
marketwatch.com/lazyportfolio
Bogleheads Lazy Portfolios

No, Vanguard does that all the time with outside firms. For example, Vanguard Primecap, VPMCX, paid PRIMECAP Management Company 0.20% last year. From the fund prospectus:

For the fiscal year ended September 30, 2014, the advisory fee represented an effective annual rate of 0.20% of the Fund’s average net assets.

In contrast, Primecap Odyssey funds (e.g. POGRX) paid PRIMECAP Management Company 0.55% last year. From its prospectus:

For the fiscal year ended October 31, 2014, the Advisor received advisory fees of 0.55% of the average daily net assets of each Fund.

Vanguard may strike a hard bargain, but PRIMECAP Management Company still made money on that deal, and paid taxes on it.
Unlike PRIMECAP Management, the Vanguard Group did not negotiate with the funds. It did not seek a profit, but colluded with the funds to provide services at cost. Had Vanguard Group charged the funds a low but profitable fee, the net profits would have gone back to the fund investors anyway (since the funds own the Vanguard Group and thus get all of the profits). Vanguard short circuited this by having the Vanguard Group not get a profit, so there was no profit to return.
Sounds like a distinction without a difference, until you look at one word I inserted: "net". The "net" profits that the Vanguard Group would have made were the gross profits less taxes. If the transaction were booked differently (as profit making, and profits returned to investors), there would have been taxes owed.
So the only effective difference between the way Vanguard set up its fees and the way it "should have" (i.e. via arms length negotiations as it did with PRIMECAP), is that it would have owed taxes. The structure looks like a tax dodge.
As John Bogle has said, Vanguard is a mutual mutual fund company, analogous to mutual insurance companies. These are companies owned by their policy holders. They charge annual premiums, and whatever profits they make (by charging more than cost) are returned to their policy holders. My question is: how are these profits taxed? It seems that Vanguard should be treated the same way. (I don't know the answer to my question, but it seems to go to the crux of the matter).

FYI: Vanguard Group Inc. has reached an agreement to pay several million dollars in back taxes in Texas, the first known payout related to a whistle-blower’s accusation that the world’s biggest mutual-fund company underpaid its taxes by tens of billions of dollars.
Regards,
Ted
http://www.bloomberg.com/news/articles/2015-11-20/vanguard-facing-whistle-blower-cases-agrees-to-pay-texas-taxes