Morn'in.
This statement from the writer (Russel Kinnel is the director of manager research for Morningstar) is misleading, and I don't understand what he is attempting to portray. One hell of a discouraging statement (below in bold) for any newbie investor or others, too. Obtaining enough clear thinking about nominal/standard types of investments is much less complex than learning fluent Mandarin Chinese.
" Picking funds for an IRA is a little tricky. The limits on yearly contributions make it challenging to build a complete portfolio. Furthermore, it's wise to view the IRA as a complement to the rest of your portfolio rather than as a stand-alone entity. However, IRAs do have their own set of rules and implied investment horizon both on the accumulation and withdrawal sides."
Let us assume a new employee at small company "A" doesn't have any access to a 401k type plan. They choose to contribute to a Roth IRA. For 2019, if they can budget the amount, they are able to contribute $6,000. This amounts to $500/month for dollar cost averaging into chosen investments.
I'm placing just a few investment choices that come to my mind and are readily available at the Fidelity.
--- ITOT, U.S. centric, cost = $66/share
--- ACWI, Global equity, cost = $74/share
--- FCNTX, U.S. centric, active managed, cost = $13/share
--- FSPHX, U.S. broad healthcare, active managed, cost = $23/share
--- FBALX, U.S. moderate allocation, active managed, cost = $23/share
I find in about 15 minutes of light thinking, several investments for a younger investor that ARE NOT tricky or leave an incomplete portfolio for growth.
No wonder folks become turned off when considering investing.
Have a good remainder,
Catch

FYI: When Walt Bettinger’s 3 a.m. alarm sounds, among the first things the Charles Schwab Corp. SCHW -1.60% chief executive does is check how much net new money his company has pulled in over the past 24 hours. Last year, that was an average of $624 million a day—more than its three biggest Wall Street rivals combined.
Regards,
Ted
https://www.wsj.com/articles/how-schwab-ate-wall-street-11556474103?shareToken=st19482b034702426f9214435d6032710f

FYI: A decade after target-date funds were damaged during the financial crisis, they have re-emerged bigger than ever as retirement investments. But they still have vulnerabilities.
Regards,
Ted
https://www.wsj.com/articles/what-weve-learned-about-target-date-funds-10-years-later-11557108540?mod=article_inline

@Art- Well, since the funds that you mentioned are only 10% of your portfolio, that gives a much better overall picture. It's reasonable to surmise that the other 90% is invested so as to give you decent diversity. In that case, it seems perfectly reasonable to reduce a number of similar funds to only one or two. I'll leave the specific recommendations on that to the other folks here, who have a better idea of funds which are currently doing a decent job.
We, like Ted, are now disinvested in the general market except for a very small part of our resources. During our accumulation years we primarily used American Funds, and while they certainly have some excellent funds with reasonable ERs, I can't recommend that anyone invest in a load fund in this day and age.
Best of luck!

All ratings have been updated on MFO Premium site, including MultiSearch, QuickSearch, Great Owls, Fund Alarm (Three Alarm and Honor Roll), Averages, Dashboard of Profiled Funds, and Fund Family Scorecard. The site now includes several analysis tools, including Compare, Correlation, Rolling Averages, Trend, Ferguson Metrics, Calendar Year and Period Performance.

@ MikeM:From statement below you said,"
Over the last 5 years or so I've simplified my self-managed portfolio to about 8 funds that I feel good about. That's 1/2 the pot. The other 1/2 is in a well diversified robo.
Would you care to let the cat out of the bag, & report which did better for 4/th Qter 2018 ?
I'm thinking I may put some money to work in a robo or directed account.
Thanks for your're time , Derf

Mike, The funds listed are in a ROTH which is about 10% of portfolio. Thanks for your opinion.
Ted, Thanks for your opinion on the funds I listed.
Hank/Sven, TRP is looking like a good place to consolidate monies once I retire. Or buy TRP at Fidelity.
Old Skeet, I knew what you would say old friend. True to form.

Congrats on your coming retirement Art. I'm about there myself, but will probably work part time to ease into retirement.
Over the last 5 years or so I've simplified my self-managed portfolio to about 8 funds that I feel good about. That's 1/2 the pot. The other 1/2 is in a well diversified robo. The 8 self managed funds include equity and fixed income funds. About 20% of that is in 1 balanced fund, PRWCX. I am not a believer in duplicating funds in categories or asset classes but to each their own. I also believe a 1 fund portfolio can be a fine idea coupled with a cash bucket in retirement. That 1 fund would be a target/retirement fund. How simple is that, but I don't think that is what you are looking for.
You, having 7 world/global funds, tells me that you and I have different portfolio building ideas, so I can't offer much help. 1 or 2 of those would be fine in my mind (or none depending on what else you hold). You can't go wrong with TRP (I'd pick PRGSX fwiw), and maybe even holding one of the Grandeur Peek funds might make sense IF they were different enough from TRP.
Good luck to you.

AKREX co-manager Saberhagen left 4/25/19 https://www.morningstar.com/funds/XNAS/AKREX/quote.html
Given the 4% turnover for AKREX that may not be an immediate concern, but the departure was unexpected.

Tend to agree with Ol’Skeet that number of funds doesn’t matter a lot. Getting the number down may well be a sign that you’ve successfully identified the funds that are most aligned with your own personal needs. So I suggest you view a lower number more as a measure of how well you’ve identified the right funds for you rather than a goal in itself.
A few things important to me in adding or culling funds (highly subjective criteria):
- Low fees
- Diversification across fiduciaries (fund houses or other)
- Diversification across asset classes
- Moderate exposure to international markets
- Superior downside protection relative to peers
Absent from my list is performance. Perhaps that’s due to it being so obvious a consideration. In addition, capital preservation becomes more important in retirement - especially later on. I’ve always strived to keep the number under 20, believing that meets my needs and is fairly easy to get my head around. Currently I hold 15 funds across 4 different management houses. In addition, I have one ultra-short bond fund that I treat the same as cash.
RPGAX is one of the 3 balanced funds I own - the only one with significant international exposure. I suspect the choice has as much to do with my preference for T. Rowe Price as with anything else. But RPGAX is a good fund with reasonable fees.

Hi @Art:
I tend to look at things in a different color of lens than most on the board. I'm thinking, this is because of my baackground being a former credit manager of a fairly large wholesale distribution company servicing the Carolinas, parts of Virginia, Tenn and Georgia. We would not let any one customer become more than 1 percent of our gross revenue nor carry more than two percent of our receivables. To keep the DSO low we required pre payment on special (non stock) items, as most were not returnable, along with good discounting for timely payment of invoices such as 2% ten days, net 30. Our larger and better customers just about always paid taking their discounts.
One might ask ... How does this have any light on your investment portfolio? It's simple. Even in my cash area of my portfolio I will not put more than a couple of percent of my portfolio into any one security weather it be a CD or money market mutual fund. Then moving on to the income area I keep the upper limit at a two to three percent range as well with two exceptions. In the growth & income area, I also have a cap on how much, percent wise, I'll hold in a single position. This also applies, as well, to the growth area of my portfolio.
If one or even a few funds falter then there are a good number of others that can continue to propel my portfolio. After all, funds do change managers and they have styles and strategies that move in and out of favor during market cycles as well. Think growth vs. value, small vs, large, domestic vs foreign, varrying regional allocations, varrying stock vs bond allocations, etc.
Not knowing more about your goals, positioning along with whatelse you own and in what percentages I find it hard to make comment on which funds you should "can" and which ones you should keep. There possibly could be tax issues that might need to be considered along with some other things as well.
Generally, the more risk associated with a fund the less of it I'll own in realation to other funds held within its sleeve, its area, and my portfolio as a whole. Take the growth area of my portfolio which now accounts for about 15% of my overall portfolio and holds a total of 12 funds with these being divided among four sleeves. The two largest sleeves are my large/mid cap sleeve and my global growth sleeve at about 30% each. The two minors are my small/mid cap and specialty & theme sleeves at about 20% each. Generally, for a three member sleeve, I'll run about a 50/30/20 percent mix. An example. In my large mid cap sleeve I'm 50% SPECX, 30% AGTHX and 20% AMCPX.
With all of the above being said ... I'm thinking you should do as you feel best and discount the thoughts of others (mine included).
If you want to reduce the number of holdings held within your portfolio I'm sure you have good reason to do this. Likewise, I have good reason, as well, to govern they way I do.
I'm also thinking, they are all good funds. Why "can" any of them?

Retirement within 1 year. I want to reduce the number of funds I have. Thought I would see what the collective thinks.
IVWIX or RPGAX. Keep or sell one of these world allocation funds.
ARTGX or PRGSX or FWWFX. Keep or sell which one these world large stock funds.
GGSOX or GPROX?

Krugman: “What all this tells us is that Republican positioning on economic policy has been in bad faith all these years.”
Nothing new here. Don’t need Paul Krugman to know that. Have already noticed they believe they can “scrounge up” 8.5 bill in unused funds to erect a glorified 18th or 19th century wall - apparently without raising taxes. While same folks can “explain away” food for hungry kids because: “there's no demonstrable evidence“ it helps their performance.
https://www.romper.com/p/trumps-budget-manager-says-feeding-hungry-kids-hasnt-been-proven-to-help-their-performance-45235
(By the way, the fella who did all this explaining has since been promoted.)

This looks at past motives, which appear to have considerable momentum:
https://www.nytimes.com/2019/05/04/opinion/the-sabotage-years.html

FYI: When I was a junior analyst at Sanford Bernstein nearly 25 years ago, our betters drummed into our heads that everything in the investment world went back to normal and that John Templeton was right when he said that the four most expensive words in the English language were “this time it’s different.” Bernstein had a sophisticated computer model that we referred to as the black box; its job was to tell us worker bees the most statistically cheap sectors every month. Like good worker bees, we would more or less automatically buy the stocks in those sectors and sell stocks in the most expensive sectors. The black box minted money for the firm and its clients for decades, precisely because everything did eventually return to normal. Cheap auto stocks appreciated to fair value, expensive tech stocks returned to average, and the investing world was good—safe and predictable. It was indeed dangerous to think “this time it’s different.”
Regards,
Ted
https://www.barrons.com/articles/reversion-to-the-mean-is-dead-investors-beware-51556912141?mod=past_editions

The Oaks : $1 trifecta 13-9-3 = $7,021.80 !!
Derf

Thank you Shadow
OPEN END FUND - have to do more in-depth study.
A little knowledge comes out at a time.
This link gives more history and description to a unfamiliar function!
https://www.bloomberg.com/graphics/2019-etf-tax-dodge-lets-investors-save-big
I posted it a month ago.

So what it looks like you're saying is that only AP's are allowed (able) to pull off this stunt and not your average everyday investor. True?

Any time a fund redeems shares in kind, it can dump the lowest cost basis (highest gain) shares. This tax maneuver not limited to ETFs, and anyone can buy/redeem open end fund shares.
Whether the fund will redeem in kind is another matter, but it is usually "allowed". For example, from FCNTX's prospectus:
"In addition to paying redemption proceeds in cash, a fund reserves the right to pay part or all of your redemption proceeds in readily marketable securities instead of cash (redemption in-kind). Redemption in-kind proceeds will typically be made by delivering the selected securities to the redeeming shareholder within seven days after the receipt of the redemption order in proper form by a fund."
As an investor, do you really want to get a basket full of securities instead of cash when you sell your mutual fund shares?

Junkster

I referenced this symbol back in January 2018 and have been following it since. While impressed with its performance, there is a caveat. It is prone to out of the ordinary daily trading gains. For instance most of its outperformance YTD can be attributed to an outsized daily gain one day in January. It was the same way last year where just a couple trading days contributed to its yearly gain. I worry that could cut both ways and you could see an outsized daily decline. Also, how much longer can the good times continue in securitized credit more specifically non agency rmbs.

The fund has a limited number of holdings because of its current size. So a move in a single security can move the fund’s performance on a daily basis. I would say that more than a few days influenced RCTIX performance last year, and most daily moves in most funds are noise.
In many cases, only a few days account for the performance of many investments.
For example if you missed the 20 best days in the stock market over the past 20 years(1/99-12/18) your annualized return was -.33% vs 5.62%.
Yes, in January they monetized a bond at a significantly higher price than the pricing services were pricing it at. Their investment thesis on the bond was realized faster than they had anticipated, and when they were offered a very attractive price, decided to monetize it.
Also, there's more to securitized credit than just non-agency RMBS. They don’t know how long the good times can last, but relative to other credit sectors such as investment grade or high yield, they think securitized credit and non-agency RMBS can still offer strong relative returns.
Non-agency RMBS won’t produce the returns they have in the past, but today they still offer good yields with capital appreciation opportunities. Housing continues to improve, borrowers continue to pay their mortgages, and loan to values continue to improve. So they think these underlying trends will continue to support the non-Agency RMBS market -- which I noted in my article.
JoJo26

That's what you get with less liquid underlying instruments... Honestly, a daily liquid mutual fund probably isn't the best package to offer a strategy that is largely structured credit.
If the fund gets larger and then subsequently sees large redemptions, it will be difficult to unwind positions without taking severe down marks.

With regards to liquidity, the fund has a 60% investment grade minimum specifically designed to meet the daily liquidity needs of investors. Between cash and Agency mortgage TBA’s over 60% of the fund could be in cash tomorrow.
Additionally, regarding the non-agency RMBS, there is strong demand for this paper, and it can be liquidated quickly as well. The sector has recovered substantially and trades very well.
Investors would be wise to consider fund size with regards to liquidity in non-agency RMBS. Many of the mega funds who would need to liquidate billions of dollars in Non-Agency RMBS would have a much more difficult time than a smaller fund such as RCTIX.
Last, RCTIX invests across the capital structure of the individual securities they own. In many cases, they've invested in the senior tranches of the structure. Also, the fund is not investing in odd lot securities that can be difficult to trade.
I hope that this additional information is helpful. I'm done reporting on the fund and moving on.
Best.

I'll try this another way. What follows is simplistic, but should suffice.
It's Jan 2; there's a new ETF. It wants to invest in stock ABC, trading at $12. So it sells its first share to an authorized participant (AP) in exchange for one share of ABC. The ETF share now represents 100% of a fund portfolio holding one share of ABC.
It's Dec 15; ABC is trading up 25%, at $15. Another two APs come along and each exchanges a share of ABC for a share of the ETF. There are now three ETF shares outstanding. Each represents a 1/3 ownership of the portfolio of 3 shares of ABC.
The unrealized gains in the portfolio are: $3 + $0 + $0 since the first share appreciated.
It's Dec 18; the ETF manager wants to swap all of the fund's ABC shares, trading at $15, for shares of XYZ, also trading at $15. He could sell ABC, realize a $3 gain, and buy XYZ. Then later in the month, when cap gains are distributed, whoever owned each of the ETF shares would get a $1 cap gain div. ($3 portfolio gain divided among three shares.)
But an AP holding one ETF share decides to sell back its one share. Using redemption in kind, the AP is handed one share of ABC. Not just any share, but the original, lowest cost-basis share.
Now you might think that, like gifting shares, that ABC share would carry with it its original $12 cost basis. Oh, lucky day. There's a tax law that says when you redeem in kind, the cost basis resets. So the AP has one share of ABC with a cost basis of $15. Cap gain? Poof, gone!
The ETF swaps the other two shares of ABC (with cost basis $15/share) for two shares of XYZ. No gain is realized by the ETF, and no gain is realized by the AP when it sells the share it just received.
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Same example, but with a Vanguard fund.
It's Jan 2; there's a new fund. It wants to invest in stock ABC, trading at $12. It sells an Admiral class share to an investor for $12 in cash, and uses that cash to buy one share of ABC. The Admiral share now represents 100% of a portfolio holding one share of ABC, so it's worth $12. Exactly what the investor just paid for it.
It's Dec 15; ABC is trading up 25%, at $15, so the fund (with one share outstanding) is also trading at $15. A second investor comes along and buys one Investor class share at $15. The fund uses that cash to purchase a share of ABC. There is now one Admiral class share outstanding and one Investor class share outstanding, each representing a 50% interest in a portfolio of two shares of ABC (worth $30 total).
Same day; an AP comes along and exchanges one share of ABC for one ETF share of the fund. There are now three shares outstanding (one each of ETF, Admiral, Investor class), each representing a 1/3 interest in a portfolio holding three shares of ABC.
It's Dec 18; the fund manager wants to swap all of the fund's ABC shares, trading at $15, for shares of XYZ, also trading at $15. He could sell ABC, realize a $3 gain, and buy XYZ. Then later in the month, when cap gains are distributed, whoever owned each of the various shares would get a $1 cap gain div. ($3 portfolio gain divided among three shares.)
But an AP holding the one outstanding ETF share returns and sells back the share. Using redemption in kind, the AP is handed one share of ABC. Not just any share, but the original, low cost basis share.
Once again, the cap gains associated with that ABC share goes poof! Meanwhile, the fund is left with two shares of ABC (with cost basis $15/share). It swaps those for shares of XYZ. No gain is recognized by the mutual fund, and no gain is recognized by the AP when it sells the ABC share it just received.
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All the magic is with the ETF. The OEF shares are simply along for the ride.