On another investment forum, a thread has recently been started to share portfolio allocation thoughts & strategies for discussion/comparison. I thought it would perhaps be a worthwhile exercise and/or learning experience to have a similar thread on this topic on this forum. Here was my contribution:
As a retired investor, "I dislike volatility!", to quote keppelbay. Especially in the current uncertain market and political environment, preserving capital is more important to me than chasing returns on capital. I prefer to err on the side of caution since I don't need a lot more money, and all my expenses are covered by generous pensions and Social Security.
Currently, my conservative portfolio allocation is as follows:
- 45% Bond OEFs (APDPX, DHEAX, PYLD and RCTIX)
- 30% CDs
- 25% Alternative OEFs (QDSNX and QLENX)
Once the CDs mature next year, I may shift my portfolio allocation to the following:
- 60% Bond OEFs (will probably add BINC and/or ESIIX)
- 25% Alternative OEFs (no change)
- 15% Allocation OEFs (probably split between PMAIX and PRCFX)
Hopefully, this will be a "sleep well portfolio" by keeping the standard deviations of the allocation and the alternative OEFs below 10%, and the bond OEFs below 5%. Of course, nothing is set in stone. I will always be dancing near the exit if the circumstances warrant it.
Good luck.
P.S. Based on Portfolio Visualizer, and back testing with a start date of July 2023 (inception date of PYLD), my current portfolio would have had an annualized return (CAGR) of 10.5% with a standard deviation of 2%, and a 0.47% correlation to the S&P 500.
Comments
d28% of my 46% in bonds is Junk. Deliberately wanting the yield. 18% of total is in 3 single-stocks. Quite happy with them, so far. Dividend payers. A few years before RMDs are due, I'm already taking a few or several thousand each January from the T-IRA, reducing, ostensibly, the size of the RMDs when it comes time for that.
I used to always be trying to diversify for its own sake, but more recently have taken the advice of the late Charlie Munger. "Don't be doing that for its own sake." Heaviest in Info Tech, not because I like those Big Name slimeballs, but because my mutual funds are there. A close 2nd-place is Financials, lagging by just 1%, 26 to 25. Only 4.35% of stocks is in International.
The Market ignores politics and ethics (or lack thereof) until it just won't, anymore.
I ran PV with your portfolio, dividing the bond funds equally (11.25% each) and the alts equally (12.5% each). I also prepared a second portfolio, substituting PIMIX for PYLD to get a modestly longer time frame.
From this PV analysis (July 2023 - Aug 2025) you can see that this was a reasonable substitution. Same annual returns, same std deviation, same 0% max drawdown.
When one drops the original portfolio from the input, then PV calculates over the period April 2022 - Aug 2025. This adds a downdraft (April - June 2022) that the shorter period doesn't have. The annualized return drops from 10.9% to 8.8%, while std dev increases from 2.0 to 2.9.
You might consider substituting similar funds with longer lifetimes to get estimated performances over even longer time periods.
Maximizing Sharpe ratio for the original funds (substituting ICSH for CDs) PV says:to use:
APDPX 20.71%
DHEAX 72.72%
QLENX 6.57%
The annualized return is a little less (10.45% vs. 10.96%), but the std dev is cut nearly in half (1.10 vs. 2.01). However, this too is calculated over a very short time period.
7 equally weighted positions here (14.25% portfolio weight each). Other than a long-short fund (CPLSX) and a real assets fund (RAPAX), there isn’t much risk on the table. Third riskiest part is the equally weighted CEF basket. It’s tilted towards income producing assets & hedged equity.
I’ve always looked at a portfolio as consisting of big “pieces” rather than focusing on stocks, bonds, cash, etc. Case in point: BAMBX is a pretty unique animal. It doesn’t fit neatly into any of the mentioned asset classes. As an investor you can occasionally change-out segments to maintain a risk profile appropriate for your age & circumstances. Sometimes I’ll sell something that’s had a strong run and replace it with something I think represents better value at the time.
"I found my funds by the following - Under Fidelities' "News & Research" click on Mutual Funds. Then select Morningstar 5 star rated funds. From this list sort by 3 year sharp ratio."
Good luck.
I tend to look at the last three and five-year periods when it comes to the stars. I think we're in a different investing world since the end of low rates, and maybe since COVID.
One thing to consider, you might be missing out on some good funds that don't accurately fit in an M* style box, so may not be accurately starred.
The filters allow you to set any min and max you want but also include checkbox ranges. For each of those ranges it tells you how many funds pass the filter. It tells me that there are 943 funds with std dev's between 0 and 5.
Then checking off the 5* box reduces the number of results passing both filters to 96.
I suggest checking off two other attributes in the filter: "Include ETFs" and "Include closed funds" (because they may be open outside of Fidelity). There's also an "include leveraged/inverse funds" if you're so inclined.
Finally, keep in mind that this screener excludes funds you cannot buy at Fidelity. It also excludes D&C funds. You won't find PIMIX here. You'll only see retail shares, I-2, shares, and I-3 shares. No lower ER class I shares - Fidelity doesn't sell them.
Here's the search on PIMCO multisector bond funds to illustrate that.
Fidelity Pimco search.
that don't accurately fit in an M* style box, so may not be accurately starred."
Good point.
This is especially important when screening unconventional funds which are more likely to be miscategorized.
that said, i used to be a pretty staunch follower of a few Dave Ramsey FB groups and that was largely the strategy employed.
I think Fidelity has the worst mutual fund screener of all the major brokerages.
Vanguard doesn't appear to have a "traditional" fund screening tool.
They do have a fund comparison tool which can be used to compare up to 5 mutual funds or ETFs.
https://investor.vanguard.com/tools-calculators/etf-fund-comparison-tool
One can also select a fund family and sort by average annual returns (1-yr, 5-yr, 10-yr) or SEC yield.
T. Rowe Price was selected as the fund family in the link below.
https://investor.vanguard.com/investment-products/list/non-vanguard-mutual-funds?filters=open&FundFamilyId=6107
(What you see is a linear graph showing how a hypothetical $10,000 investment fared over the time period chosen.)
It looks like you can only view one fund family at a time. Tres useful, non?
I was born into investing in the world of etrade/scottrade so the whole, find a 800 number in the "Top Funds" list in fortune/kiplingers/barons i didn't have to deal with.
Though I have noticed that recently a few Vanguard funds' Admiral shares have shown up elsewhere. VPMAX, VZICX, VMSAX, VCPAX, and VEOAX are sold at Fidelity (TF, of course).
In May 2024, I converted PRWCX to TRAIX in Vanguard account.
If rates continue to fall I will rotate out of the lower duration funds into longer duration funds. I keep my eye on growth in M2, so I am not convinced that rates will continue to fall. OTOH, I figure I ought to take some action before the euphoria of the actual rate cut sets in.
On the safer side of the barbell from lowest SD/duration to highest are
BUBIX 6%, BBBMX 6%, FGUSX 12%, and now BSBIX at 6%. There is, of course what remains in the mmk.
On the riskier side are: CBUDX 6%, CBLDX 6%, and now OSTIX and THOPX at 6% each.
I consider FLTR @ 6% to be something of a wild card. And it looks like there is room to add a little more volatility/duration.