What to do?

Puddnhead

Hi guys,

The Mrs. IRA is mostly cash or CDs right now. A small position in FXAIX is all that's in the market right now. As CDs come due, I would like to invest in index funds.....say, foreign, global, world and U.S. Say, total market or equally weighted or real estate index fund. Again, will trickle in over time.....no rush. She likes CDs right now after seeing my losses last year and her having none. But we all know at some point that will change, so I'm looking to compose a buy list. Would appreciate your ideas. I would like this to be a mostly set and forget portfolio. Also, you can throw in bond ideas if you have any....thanks.
God bless
the Pudd

MikeW

Not an index fund but I really like COWZ here. One of the few funds that held up well last year and has also had a nice return to date this year. Plus strong long term performance.

bee

also,
Pacer has a herd of other Bovine ETFs...Emerging Market (ECOW), International (ICOW), Fund of Funds (HERD), Global (GCOW), US Large Cap (Bull), Small Cap (CALF)

Very Interesting...thanks @MikeW.

Crash

Yes, COWZ is up already by 7.5% YTD on saturday, 11 feb, '23.

SCHP= TIPS. (Schwab.)
FCBFX. 58% in triple B. (Fidelity corporate.)
HYMU. Munis. (Blackrock.)

Balanced: DODBX. Over 15 years, it's in top 7 percent of category. +7.63%.

Global stocks: YTD +8.42%. (TRP.) PRGSX . Over 15 years: +7.82%, top 18% of category.
52 USA. 43 foreign, presently.

Maybe SCHP is an Indexer. None of the others.

VMIAX. Basic Materials/Chemicals. (Vanguard. Stinky service.). YTD +6.49%. Over 15 years: +7.47, top 22 percent in category.

Single stocks for steady dividends: BHB. (I own it.) Regional bank in Northern New England. HQ in Bar Harbor, Maine. That's where Acadia National Park is. Branches in ME, NH, VT.

O is the mother of all REITS. Over 15 years, it's up by +10.45%. Dividends to reinvest. But I don't know how they keep doing it. The payout ratio is a huge, out of line number... But REITS are different animals, too. Since 1994, the stock is up by +730%. That's not a typo.
(Among REITs, I own PSTL. But it's still rather young.)

"Happy Motoring!"
"No, No, NO! Don't open that closet!"

MikeW

Yes COWZ was a suggestion from @BenWP….

Mark

As an add on to trickling into FXAIX I also do the same with SCHD and CDC. Over the long term they do slightly better than FXAIX but not enough to bet the farm on. Also CDC does not have that long a history and may look less appealing in a long bull market. YMMV but good luck.

Baseball_Fan

You might consider TSUMX, Thornburg Summit, balanced fund, has international exposure, focus is on provding total return over rate of inflation, younger folks runnng the fund, doesn't seem like they would retire anytime soon, no key person risk....if I had to only pick one fund outside of cash, tbills, CDs, MYGAs...maybe I would look in that direction...also would maybe look at BLNDX Standpoint if I had the conviction (which I'm not certain I do) that this might be one of the better funds over the next 10+ years...dunno.

Best Regards,

Baseball Fan

LewisBraham

VBIAX is probably the easiest index set it and forget it portfolio, although I think the active VWELX is better and VWIAX if you’re more conservative.

msf

Over the long term they do slightly better than FXAIX

Do they do any better, or are you just looking relative to a particular moment in time (i.e. now)? Comparing their three year rolling cumulative returns by calendar years (e.g. Jan 2019-Dec 2021), the figures (from M* charts) are:

     2020-2022  '19-'21	'18-'20	'17-'19	'16-'18	'15-'17	'14-'16	'13-'15	'12-'14	'11-'13
FXAIX	24.75%	100.32%	 48.80%	 53.10%	 30.38%	 38.28%	 29.02%	 52.54%	 74.51%	 56.77% 
SCHD	44.56%	 90.14%	 38.51%	 45.45%	 32.84%	 40.22%	 29.53%	 48.09%	 65.32%	 56.42%
CDC	38.27%	 78.90%	 27.03%	 30.48%	 31.78%	 38.76%	   -	   -	   -	   -

Over its lifetime (July 1, 2014 through Feb 10, 2023), CDC has done slightly worse than FXAIX, returning a cumulative 138.04% vs FXAIX's 143.78%.

More importantly, all the cumulative figures ending Dec 31, 2022 are significantly skewed by FXAIX's sizeable underperformance in 2022 relative to the other funds: -18.13% vs -3.23% (SCHD) or -7.76% (CDC). (FXAIX has done better so far this year.)

I'm not knocking any of these funds, and I can certainly see the point in suggesting dividend oriented funds to someone who has been focused on cash returns. It's just that there's a tendency for people to look at "what have you done for me lately" even when trying not to - sometimes it's baked into the numbers.

For a set and forget fund that covers all bases ("foreign, global, world and U.S", and fixed income) one might consider VGWIX / VGYAX. Not an index fund, but still a low cost fund. Its 35/65 stock/bond mix may also suit someone moving from a cash portfolio. Funds with more traditional blends include VGWLX / VGWAX and CIBFX (though jumbo). A drawback of these funds (notably the Vanguard ones) is a dearth of EM investment. You may consider that a plus (arguably a more conservative approach).

hank

(deleted)

Mark

@msf - you are correct. I'm not sure what I was looking at when I posted the comments but possibly I entered bad data at PV.

Puddnhead

Hi guys,
Thanx for all your responses and ideas. You gave me a lot to think about and research in the days to come. This is going to be slow and take a while. Again, thanx for all the input.
God bless
the Pudd

davidrmoran

msf said:

Over the long term they do slightly better than FXAIX

Do they do any better, or are you just looking relative to a particular moment in time (i.e. now)? Comparing their three year rolling cumulative returns by calendar years (e.g. Jan 2019-Dec 2021), the figures (from M* charts) are:

     2020-2022  '19-'21	'18-'20	'17-'19	'16-'18	'15-'17	'14-'16	'13-'15	'12-'14	'11-'13
FXAIX	24.75%	100.32%	 48.80%	 53.10%	 30.38%	 38.28%	 29.02%	 52.54%	 74.51%	 56.77% 
SCHD	44.56%	 90.14%	 38.51%	 45.45%	 32.84%	 40.22%	 29.53%	 48.09%	 65.32%	 56.42%
CDC	38.27%	 78.90%	 27.03%	 30.48%	 31.78%	 38.76%	   -	   -	   -	   -

Over its lifetime (July 1, 2014 through Feb 10, 2023), CDC has done slightly worse than FXAIX, returning a cumulative 138.04% vs FXAIX's 143.78%.

More importantly, all the cumulative figures ending Dec 31, 2022 are significantly skewed by FXAIX's sizeable underperformance in 2022 relative to the other funds: -18.13% vs -3.23% (SCHD) or -7.76% (CDC). (FXAIX has done better so far this year.)

I'm not knocking any of these funds, and I can certainly see the point in suggesting dividend oriented funds to someone who has been focused on cash returns. It's just that there's a tendency for people to look at "what have you done for me lately" even when trying not to - sometimes it's baked into the numbers.

For true buy & hold types, the argument for SCHD over SP500 is clear: SCHD has nontrivially outperformed 10/5/3/1y. (A flip occurred 4mos ago.) For those who fancy themselves slightly more conservative or at least 'non-volatilist', a second argument for SCHD is clear. For preservation Lipper gives SCHD 5* and FXAIX/IVV 4*. MFOP gives Great Owl status to both (interestingly, FXAIX/IVV is on the honor roll too, and not SCHD) but shows SCHD's UI to be ~50%-75% of SP500, depending on time period.

larryB

@Davidrmoran. +1. Having first invested in SCHD in 2012, it has ultimately become my entire equity position. I have been retired since 2019 and have a conservative asset allocation. I question the appropriateness of a single holding all the time but it works for me. And it leaves me lots of time to play with the other 70% of the portfolio.

davidrmoran

Wish I had done the same, and intend to do so as I slowly unwind current holdings when back to breakeven

LewisBraham

How the index SCHD tracks works:
https://indexologyblog.com/2023/01/20/the-dow-jones-dividend-100-indices-part-1-a-focus-on-dividend-sustainability-and-quality/

And this provides further useful analysis of the index as it stands today:
https://indexologyblog.com/2023/01/24/the-dow-jones-dividend-100-indices-part-2-strong-fundamentals-and-the-benefits-of-diversification/

larryB

@ LB….. as far as I am concerned the index just works. As it has turned out I have not needed the income but it’s nice to know it’s available. And it is growing nicely. LB

PRESSmUP

SCHD can serve as a superb foundation for a long term portfolio given its performance, distributions, and rate of increase in those distributions. Of note, it does lack meaningful investment in certain sectors, such as utilities and real estate, but those are easily supplemented in a way to boost monthly income.

msf

You're proving my point - it's all about "what have you done lately".

Had you looked at the same figures at another point in time, say on SCHD's 10 year anniversary (10/31/2021), SCHD's cumulative performance would have underwhelmed:
10 year: 309.10% vs 348.91% (FXAIX)
5 year: 118.00% vs. 137.75%
3 year: 71.20% vs. 79.20%
1 year: 44.08% vs. 42.89%

The fairly recent outperformance should be obvious from my table showing SCHD outperforming FXAIX by a cumulative 20% over the three past calendar years (2020-2022).

Do you give any consideration to "regression to the mean"? The same table shows FXAIX outperforming SCHD by as much as 10% cumulative in other three year periods. With actively managed funds, there's a lot that can change. But with index funds, a "true buy & hold type" is going to need more than a one year anomaly to "sell & trade":

2023 YTD: 1.67% (SCHD) vs. 6.71% (FXAIX)
2022: -3.23% vs. -18.13% <-- 15% spread
2021: 29.87% vs. 28.69%
2020: 15.08% vs. 18.40%
2019: 27.28% vs. 31.47%

What's the theory for buying SCHD? That any time the market goes down, SCHD will win big? Or that we can expect, or at least hope for, another huge year (relatively speaking) for SCHD in the future? One that will make up for its typical slightly underperforming years?

At least we can dispense with the former idea - that SCHD outperforms in down markets.
2018: -5.56% (SCHD), -4.40% (FXAIX)
2015: -0.31% (SCHD) vs. 1.38% (FXAIX)

interestingly, FXAIX/IVV is on the honor roll too, and not SCHD

This is a good example of why I continue to urge people to understand numbers, not just quote them. Honor roll status is based on raw performance relative to category, i.e. top quintile over 1,3,5 year spans. Immediately we see one potential issue - these are funds in different categories.

At least as important is the fact that FXIAX's performance is being compared with that of (only) other S&P 500 funds. With a 2 basis point ER, it's a sure bet that FXIAX will always be in the top quintile of its narrow category of peers. Instant honor roll.

SCHD is in Lipper's Equity Income category - a broad category, and SCHD doesn't always come out in the top 20%.

The fact that FXAIX is a LC Blend fund (M* terminology) while SCHD is LCV goes far to explaining the 2022 split in relative performance. Value simply had a once in a generation (relative) banner year: VVIAX lost 2.08%, while VFIAX lost 18.15%. This 2σ+ fluke is hardly suggestive of future outperformance.

To reiterate, SCHD is a fine fund. But a better long term fund? I wouldn't place heavy bets on one style of investing - value or otherwise. Sure, use SCHD, but then counter balance it.

larryB

@ PressUP… I I thought about those two missing sectors many times. Just ran 80% SCHD, 10% VPU and 10% VNQ vs 100% SCHD. SCHD won but the next ten years may be entirely another story.

PRESSmUP

@larryB Utilities and real estate would rarely provide a total return boost for any fund, including SCHD. For me, it's to provide balance, along with a kicker in terms of distributions. I use UTG, UTF and RQI in these spaces, along with AEP and WPC as individual holdings. I do have SCHD in both a taxable account and IRA.

It's hard for recommendations, as everyone has a unique set of requirements, as well as tolerance for risk.

larryB

@PressmUP…. I appreciate the discussion. Another factor for my circumstances is to minimize the moving parts in case I depart the scene early. I use VTINX as a 30% equity benchmark as a one fund solution. I could use VWIAX but that has more equity than I desire or need.

davidrmoran

>> what have you done lately

? SCHD longterm performance shows this is, again, a rather misleading way to put it.

>> Had you looked at the same figures at another point in time,

sure, cherrypick away

>> that we can expect, or at least hope for, another huge year (relatively speaking) for SCHD in the future? One that will make up for its typical slightly underperforming years?

and now you make it sound like SCHD is more this volatile / Heebnerlike instrument.

>> a "true buy & hold type" is going to need more than a one year anomaly

huh ?

god forbid they look at the 10y (end of January) comparison.

>> but then counter balance it.

Oh. Of course!

What do you suggest?

So often when one does this, performance suffers. Just compare FXAIX with VONE over time.

Or with RSP, a different kind of balancing.

'Tis the great mystery of investing decisionmaking.

Pleasing outcomes --- recently. Recently, go with VONV or RSP.

But oops, not the last month.

So: everybody, just do VT, and let its broad diversification (counterbalancing) be the drag, most often, or the plus.

As always, where is that breadth sweet spot?

johnN

Mama largest holders are:
* fidelity 2015 tdf FFVFX (bulk of her holdings)
*Dodge cox and balance
*Fidelity contrafund FCNTX
*tlt and shy

*Lots Corp/ private Bond %large companies ytm ~5 6%, Ave ytm 5 YRS.

Portfolio moves upward like turtle since xmas but did not loose much last yr (-12%), think 5 7% from all time high
Capital preservations are keys. She is happy w fixed 3 5% annually returns





For mine very aggressive 15% in tsla + growth stocks
* 35% in sp500 (spy spxl)
*30s% in mid caps + small caps ( vo vong Tna soxl tqqq )
*10% in overseas etf indexes (yinn FXI veu)
*15% in private Corp Bonds.
Few % in speculative plays and btc ethe silver 3xgold etf tmf labu Tsll Fngu + smallcaps plays VRM nvta bbig, ~3% daily tradings (short term p&l was up 33% last wk but now only +13%)


Use 12% of margin powers for CSP
Lots leap call or monthly cover calls contracts for Tsla bros nvda snow Rivn amaz goog brk.b O. Sold lots bonds last 6 months cover csp and assignments

Mine overall portfolio is 10% down from all time high since dca aggressively past 6 wks

I am happy w yearly 5 7%% returns but hard to say

Hope bottoms don't fall out under
PLS do critique thankyou

davidrmoran

https://www.morningstar.com/articles/1136535/should-fidelity-investors-just-index

msf

davidrmoran said:

>> what have you done lately

? SCHD longterm performance shows this is, again, a rather misleading way to put it.

>> Had you looked at the same figures at another point in time,

sure, cherrypick away

You pick one trading day out of 2800+ and I'm the one cherry picking?

I looked at the long term (read lifetime) performance of SCHD on every trading day since inception and found that on most of them, its long term performance was superior to that of FXAIX. At least by eyeballing it.

The easiest way to see this is to plot the two over SCHD's lifetime, and note that there are long (multi-year) runs where FXAIX's cumulative performance exceeds that of SCHD:
11/2/13 - 2/5/16 (2¼ years), 7/27/16 - 5/12/21 (4¾ years).

Here's Portfolio Visualizer's graph. You won't get quite the same detail I'm providing (gory details below). The PV graph looks as though FXAIX led the whole way until five months ago. Though that's not far off from what happened.

FXAIX outperformed SCHD for virtually its whole life until five months ago. Are those few recent months supposed to stand in for long term performance?

When you talk about cherry picking, recognize that if one were to pick a date at random, much more likely than not, FXAIX would have outperformed SCHD to that point in time.

davidrmoran said:

>> that we can expect, or at least hope for, another huge year (relatively speaking) for SCHD in the future? One that will make up for its typical slightly underperforming years?

and now you make it sound like SCHD is more this volatile / Heebnerlike instrument.

I'm looking not at SCHD, but the difference in annual returns between the two funds. This has got little to do with volatility of either component, but of volatility of their correlation.

If, for example, you take two share classes of the same, wildly volatile fund, differing only in ERs, then the volatility of the gap in performances will be zero.

The difference in annual returns ranges in magnitude between a half percent (0.52%) and 4½ percent (4.59%) except for 2022, when the difference in performance is more than triple the next largest annual difference. In the "biz" we call that an outlier.

Lewis linked to a couple of pieces that suggest an explanation for this outlier. Assuming you buy the reasoning, the question for you is whether you believe similar conditions (with similar results) will happen again.

11/1/11 - 1/24/12 - SCHD leads
1/25/12 - 5/15/12 - FXAIX leads
5/16/12 - 5/18/12 - SCHD leads (ends on a Friday)
5/21/12 - 5/23/12 - FXAIX leads
5/24/12 - 5/25/12 - SCHD leads (ends on Friday, Mon holiday)
5/29/12 - one day - FXAIX leads
5/30/12 - 6/19/12 - SCHD leads
6/20/12 - one day - FXAIX leads
6/21/12 - 8/16/12 - SCHD leads
8/17/12 - 3/20/13 - FXAIX leads
3/21/13 - 8/13/13 - SCHD leads
8/14/13 - 8/16/13 - FXAIX leads (ends on a Friday)
8/19/13 - one day - SCHD leads
8/20/13 - 9/18/13 - FXAIX leads
9/19/13 - one day - SCHD leads
9/20/13 - 11/5/13 - FXAIX leads
11/6/13 - 11/12/13 - SCHD leads
11/13/13 - one day - FXAIX leads
11/14/13 - one day - SCHD leads
11/15/13 - one day - FXAIX leads (ends on a Friday)
11/18/13 - 11/20/13 - SCHD leads
11/21/13 - 2/5/16 - FXAIX leads (ends on a Friday)
2/8/16 - 2/9/16 - SCHD leads
2/10/16 - one day - FXAIX leads
2/11/16 - one day - SCHD leads
2/12/16 - 6/23/16 - FXAIX leads
6/24/16 - 6/28/16 - SCHD leads
6/29/16 - one day - FXAIX leads
6/30/16 - 7/11/16 - SCHD leads
7/12/16 - one day - FXAIX leads
7/13/16 - 7/15/16 - SCHD leads (ends on a Friday)
7/18/16 - one day - FXAIX leads
7/19/16 - 7/26/16 - SCHD leads
7/27/16 - 5/12/21 - FXAIX leads
5/13/21 - one day - SCHD leads
5/14/21 - 4/25/22 - FXAIX leads
4/26/22 - 4/27/22 - SCHD leads
4/28/22 - 5/4/22 - FXAIX leads
5/5/22 - 7/20/22 - SCHD leads
7/21/22 - one day - FXAIX leads
7/22/22 - tie, Friday
7/25/22 - 7/27/22 - SCHD leads
7/28/22 - 8/18/22 - FXAIX leads
8/19/22 - 8/24/22 - SCHD leads
8/25/22 - one day - FXAIX leads
8/26/22 - 9/8/22 - SCHD leads
9/9/22 - 9/15/22 - FXAIX leads
9/16/22 - present - SCHD leads

msf

Some things can appear so obvious that they become difficult to explain, yet be so unclear to others. I watched an economics teacher struggle to explain something having to do with averages, I forget what. As a 3rd party observer, these different perspectives were visible to me. Perhaps what is happening here is like that and I'm not explaining things well.

I wrote: there's a tendency for people to look at "what have you done for me lately" even when trying not to - sometimes it's baked into the numbers.

Here's a paragraph from CBS News describing how "what have you done for me lately" is baked into M*'s ratings. On the surface, it looks like M* is biasing its ratings toward long term performance, because it weights 10 year performance at 50%, while weighting 5 year performance at 30%, and 3 year performance at just 20%. But something else is going on.

Obviously, the past three years account for 30 percent of the past ten years, which means that they account for 15 percent of the overall rating (30 percent X 50 percent). They account for 18 percent of the five-year rating (60 percent X 30 percent); and 100 percent of the three-year rating. Sum them all up, and we find that the past three years account for 53 percent of a fund's overall long-term rating.

https://www.cbsnews.com/news/whats-right-and-whats-wrong-with-morningstar-fund-ratings/

There's a similar problem in looking at good 1/3/5/10 year figures and concluding that performance is somewhat uniformly good, especially over longer terms. The final year's performance is influencing (I would say skewing) all the numbers. We saw this effect clearly (though with respect to bad, not good, performance) in figures published after March 2020. Suddenly good (and not so good) funds looked terrible, even long term.

Now I'm not expecting another once in a century pandemic anytime soon, nor do I think that nothing has been done to make economies more robust. So I'm inclined to discount (but not ignore) 2020 figures to the extent that they distort averages.

larryB

Please excuse my ignorance but why the in depth comparison of SCHD with FXAIX? The fact that Schwab’s dividend fund has kept pace with the SPY index since its inception is icing on the cake. Nice but not the reason people invest in a dividend fund. The usual comparison is SCHD VS VYM or any other dividend fund. I don’t get this exercise in micro analysis of things not needing to be compared.

yogibearbull

VYM is current-dividend, VIG is dividend-growth, SCHD is dividend-blend. In recent years, div-blend has worked better.

LewisBraham

While all this debate on the performance numbers of SCHD and FXAIX has a certain value, in the absence of an explanation or understanding of why either fund did or didn’t do well in the past and an analysis of whether or not said performance is repeatable in the future, those numbers and the discussion of them are useless to investors today.

Context matters. For instance, in the well-wrought analysis of the math behind funds MFS just posted, he makes a surprising non-math fundamental statement at the end.

I'm not expecting another once in a century pandemic anytime soon,

That belief informs his investment strategy. I and a number of medical experts disagree with that belief. I think serious pandemics will now occur more frequently, and we aren’t even finished with the current one. And it matters whether or not you agree because certain companies, sectors and investment strategies will benefit or be hurt by which side of that argument comes true. SCHD by design favors a certain type of company and a certain factor—quality comes to mind. It also historically has been overweight certain sectors of our economy. Interestingly, the international version of SCHD, with the ticker SCHY, has different sector overweights and will benefit or be hurt by different dynamics as a result. I also think interest rates and the direction they’re going matter significantly to dividend strategies. In general, I have problems intellectually with simplistic rules-based investment strategies for funds that may not be able to adapt to changing conditions in an extraordinarily complex world.

All of which is basically just a long winded way of saying past performance is no guarantee of future results. You have to look beyond those numbers, ask why and whether conditions are similar or different today.

MikeM

+ @larryB

I can remember not to many years ago, all the comparison and clear winner from that comparison was CAPE over the S&P 500. It was the clear winner - until it wasn't. I'm sure many bought into CAPE high and sold when it faltered. The key is having the conviction to stay with one scheme over another. Value and dividend stocks will have their day, same as growth or tech or using the CAPE methodology. Isn't the S&P500 a collection of all those sub sets?