M* On Allocation/Balanced Funds

yogibearbull

Covered are the US (up to 10% foreign), diversified (11-39% foreign), and global ( >= 40% foreign) moderate/global allocation/balanced funds. Excluded are Multi-Asset funds (M* calls them "supporting"; it's not a M* Category yet) and the TDFs (with glide-path allocations).
https://www.morningstar.com/funds/best-balanced-funds

"After suffering one of their worst downfalls on record in 2022, balanced funds bounced back in 2023. The Morningstar US Moderate Target Allocation Index, which resembles a typical diversified balanced fund, gained more than 15% for the year to date through mid-December, and despite continued pessimism from some market observers, the outlook isn’t as grim as some soothsayers say....."

Tarwheel

M* continues to slight FBALX, one of the top performing balanced funds over every time period. Yet they promote TRPBX, a mediocre fund at best. I owned both for many years (until I moved funds from TRPBX to FBALX this year), and FBALX has greatly outperformed TRPBX over the past 1, 3, 5, 10, 15 years with slightly higher volatility.

yogibearbull

I checked and omission of FBALX from the list wasn't accidental. The list included only Gold, Silver, Bronze rated funds. M* downgraded FBALX to Neutral (from Bronze) in 2019, a long time ago!

Looking at M* Reports in the Archives, M*'s issue is lots of portfolio manager changes. Fund has a large list of PMs (11; it's almost a holding pool of Fido managers that didn't succeed with their own funds, but Fido likes to keep them) and someone is always coming or going. Now, the lead manager has also changed.

FBALX 5* Rating means that it has performed well in the group, but the Analyst Rating of Neutral shows M*'s skepticism. I have noted elsewhere that FBALX is among the more aggressive moderate-allocation funds (nominal 50-70%). This shows in its higher volatility and higher effective-equity.

It's a good moderate-allocation fund. M* ratings/evaluations should count only in the initial fund screening. But if you have done due diligence and know what you own, you should be comfortable with your decisions.

MikeM

After pulling out significantly from of my Schwab robo earlier this year, I've been adding most of that money back into balanced funds, both conservative and moderate. The "balanced-funds-are-broken" mantra, I thought, was always a dumb knee jerk reaction by the media.

I already have about 20% of my self managed portfolio in PRWCX, but that fund sits in a 401k account that I can't add to. For that reason I recently added PRCFX (10% of total). I bought the manager and investment process and I'm fine with the more conservative equity/income weighting. I also added a chunk to LCR (Leuthold Core ETF) back in the summer and most recently to CGBL (Capital Group Core Balanced ETF) 5% each.

Sven

@yogibb said, I have noted elsewhere that FBALX is among the more aggressive moderate-allocation funds (nominal 50-70%). This shows in its higher volatility and higher effective-equity.

FBALX is actively managed and tracks Vanguard Balanced Index fund and with heavier weighing in the tech %. This alone contributed to better performance. I prefer the more conservative, FMSDX, whose manager has running the fund for well over 10 years. Other than a handful of funds such as Contra and Low Priced Stocks, many Fidelity funds have high turnover on their managers. I agree with M* rating based on the mutual fund track record of the manager(s) tenure. The forward performance becomes less relevant whenever there is new management.

@MikeM, I also like PRCFX for a different reason; really like to explore the bond strategy of this new fund. @msf posted information on a SMA managed by Farris Shuggi. I think there are good opportunities on bonds next year.

Tarwheel

FBALX is team managed, and Fidelity has a large stable analysts to draw from. M* praises other fund companies for using team management but they don’t seem to like Fidelity’s approach, even when it yields excellent results. I’ve owned FBALX for more than 20 years and only regret not buying more of it, rather than many of M*’s recommendations.

davidrmoran

what he said

FD1000

I stopped paying attention to M* many years ago, MFO is better.
One of the best ways for better performance is concentration in the right funds.

Tarwheel

@yogibearbull — Sorry, I didn’t mean to shoot the messenger, but I am disillusioned by M* fund rankings. I used to research funds religiously on M*, and experience has taught me that their rankings are nearly useless. I have bought many highly ranked funds that turned out to be disasters, and I’ve bought funds (like FBALX and FCNTX) that M* damned with faint praise and they turned out to be great investments. Most of my investments are with Fidelity, and my impression is that M* is biased against Fido — I suspect because of advertising. Before M* restricted access to their site, however, I found it useful for researching funds using my own criteria. Now that M* is largely paid access, I seldom use their site anymore. For my purposes, the Fidelity website is vastly superior for researching funds now.

hank

FD1000 said:

One of the best ways for better performance is concentration in the right funds.

Duh!

habsui

hank said:

FD1000 said:

One of the best ways for better performance is concentration in the right funds.

Duh!

For best performance, concentrate in the best funds..

yogibearbull

M* now likes allocation 60-40. Some "naysayers" were at M*.

Naysayers Were Wrong About the 60/40 Portfolio. Here’s Why.
After a disastrous 2022, it turned out not to be dead after all.
https://www.morningstar.com/portfolios/why-naysayers-were-wrong-6040-portfolio

Crash

Agreed!

And after a partial rejigger in January, I find myself at 57 stocks 37 bonds and 5 cash. Close enough, I guess. PRNEX is more trouble than it's worth. Gonna exit and redeploy the money in that one. Too volatile, and performance has been yucky.

Still maintaining a hard wall between retirement accounts and taxable stuff. Taxable is up to 14% of portf. total now. Retirement $$$ is all in funds in TRP, except for BRUFX. Taxable (so far) is all in single stocks.

hank

Crash said:

Agreed!

And after a partial rejigger in January, I find myself at 57 stocks 37 bonds and 5 cash. Close enough, I guess. PRNEX is more trouble than it's worth. Gonna exit and redeploy the money in that one. Too volatile, and performance has been yucky.

Still maintaining a hard wall between retirement accounts and taxable stuff. Taxable is up to 14% of portf. total now. Retirement $$$ is all in funds in TRP, except for BRUFX. Taxable (so far) is all in single stocks.

@Crash - Only $5 cash? Been there myself a few times …



Seriously. Just 5% of portfolio in cash. I guess that’s called “conviction”.

(No reference to any political figure intended.)

Crash

hank said:

Crash said:

Agreed!

And after a partial rejigger in January, I find myself at 57 stocks 37 bonds and 5 cash. Close enough, I guess. PRNEX is more trouble than it's worth. Gonna exit and redeploy the money in that one. Too volatile, and performance has been yucky.

Still maintaining a hard wall between retirement accounts and taxable stuff. Taxable is up to 14% of portf. total now. Retirement $$$ is all in funds in TRP, except for BRUFX. Taxable (so far) is all in single stocks.

@Crash - Only $5 cash? Been there myself a few times …



Seriously. Just 5% of portfolio in cash. I guess that’s called “conviction”.

(No reference to any political figure intended.)

Yes, We have money in the bank. We grow it, then it disappears--- for use at school to pay the kids' tuition. Got the car loan down to $2,600.00. So, when that amount is zero, it will help to add some free cash and I'll put it in MM Treasury fund (sweep) PRTXX. That 5% number is all the cash our Fund Managers have decided upon, collectively. All along the way, I've always been "cash-poor" in the portfolio, trying to reach a total amount goal. We're not far away. But opposites attract: wifey creates expenses. She works. I don't. I don't complain. We'll get there, as long as I don't screw the pooch.

hank

@Crash. Thanks for elaborating. Technically I’m 10% cash. That’s the normal allocation. But I threw another 10% into a short term bond fund few weeks back. Took bit of risk off the table. Bought a bit of protection.

I don’t have any opinion on balanced funds. Depends a lot on what’s being ”balanced”.. At an advanced age I’m more inclined to seek downside protection in funds that go L/S or use other hedging techniques, I realize such funds are expensive and probably won’t do as well longer term as a good low cost balanced fund. But nearer term the ride is smoother. (I certainly wouldn’t recommend those funds for younger or more aggressive investors.)

Crash

+1.