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Since CTFAX Is Heavily Invested In Bonds At This Time. Would It Be A Poor Choice To Purchase Going Into 2022. Im Also Considering Adding To BAMBX Or JHQAX. Im Looking For A Fund That Can Hold Up Well If We Get Hit With a Serious Market Drop. Which I Expect Is Coming.
It's about to throw off a significant year-end distribution so don't go buying in a taxable account today. Tomorrow, Tuesday, is record date, Wednesday is ex-date.
It all comes down to one's view of the market though. If one is eager to embrace risk of one's capital in pursuit of another 20% up year in 2022, CTFAX would NOT be the place to be.
OTOH, if one is risk-averse, and is seeking a disciplined approach to adding risk (i.e. it buys more as the market crashes), then CTFAX would be ideal. --- Just don't buy before it goes ex-div!
Can CTFAX really get "ahead" of things? It shifted its allocation a while ago. The markets (thanks to the Fed) are resilient. CTFAX is a defensive play in an era when defense is RARELY rewarded.
Along with some other low-return grinders (CVSIX, HRSAX, HMEZX, ARBIX, etc), I expect annual returns close to 4% . Which means that now inflation is destroying my portfolio. What is the actual U.S. inflation rate at - 12%?
Tough to manage your portfolio when inflation rages and your fund returns are essentially capped. I think this is a major issue for a fund like CTFAX this year. If there is no Stock market crash in 2022, or at least a very strong correction, is it a failure?
First, it doesn’t anticipate market moves but responds after the fact - I do that on my own.
Second, six of the funds 13 funds are invested in 1.56% or less. So the impact from these funds is either offset by each, negligible, or cumulatively indexing (I have no issue with indexing. I like index funds for core investing).
Third, don’t know if the er’s are cumulative or only the reported 0.65%
Fourth, the treasury index is a 31.29% holding with a 6.83 duration. Maybe I’m off here but if we’re going into 2022 expecting rate hikes then how will COTZX adjust its bond holdings.
Fifth, if all of my perceived obstacles from the above were removed, I think I’d need to be invested much more deeply than I am at present - but as you could tell, just not ready
Again I really like the idea behind COTZX but as I’ve looked closer, it may not be for me.
In review of its performance I am finding that its average total return over the past five years has been better than ten percent. Not bad for a fund that often just sits in risk-off mode.
You, as well as another poster/author I highly regard (Charles Lynn Bolin), write highly of COTZX. Still my portfolio is mostly risk-off now with a 33-36% allocation to stocks (VDADX, VDIGX, VTSAX), 23% in a stable-value fund (TIAA-Trad earning, so far a guaranteed 3%) and the rest in bond funds/cash. I still have COTZX, but it’s far less than a 5% position, which in my opinion needs to be the minimum threshold for a fund to have a meaningful impact on a portfolio. What is the percentage of COTZX that you hold?
Within my fixed income sleeve CTFAX makes up about 12% of it's investment sleeve which consist of twelve funds. Currently, my fixed income sleeve makes up about 18% of my portfolio.
But as you said, it may not be for you. Good luck with your decision.
If you have a portfolio of $5-10 million (which I do not), a 2% investment still comes out to be a hefty chunk of change ($100 - 200K), though not a big impact overall.
So one question I ask myself is, am I willing to pay the extra *er* fees for a service that I currently enjoy and still think (relatively) competent doing?
As far as investing in bonds when rates are likely to rise? I own bonds (45%) for diversification anyway. I expect volatility to accompany inflation and rising rates. Shorter duration is better when rates rise. Longer duration is typically better when the stock market falls. I am happy with the long term performance of COTZX/CTFAX, but recognize that it will underperform during bull markets,
For downside protection, I own TMSRX which has currently low returns but decent downside protection. BAMBX, SWAN, ARBIX, and PHDG rate highly. My base case is continued, but slowing growth in 2022, with moderating inflation, end of bond purchases by Fed (QE), and modest rate hikes. I am waiting for the December MFO data before making any decisions.
Wishing you Happy Holidays and a prosperous 2022!
Imo PRWCX has better risk adjusted returns than COTZX (big risk being manager skill of course)
PRWCX stats are -- 35 years, Sortino=1.40, APR=11.7, Avg 3 Year Rolling APR=11.3, Max DD=36.6, Ulcer=5.3
SFHYX stats are
17 years, Sortino=2.08, APR=7.2, Avg 3 Year Rolling APR=6.7, Max DD=16.9, Ulcer=3.5
Fund managers change and so do philosophies. COTZX did not do well in 2009, because it’s strategy was to be 100% stocks or bonds. Since then they have changed their philosophy to make the changes gradually.
It is a solid long term fund.
I like COTZX (and am considering opening a position) but I don't see it as a bond substitute.
I see COTZX as a tactical fund that is bonds when valuations are high, but stocks when valuations are low.
FWIW: As I stated above CTFAX carries a weighting of 12% within my portfolio's income sleeve. I have some other multi-sector income funds held in this sleeve that also holds some equity. The 12% weighting for CTFAX was chosen so that it could weight up to 80% in equity and not throw the sleeve beyond its 15% equity cap. So, for me, it stays within this sleeve even if it sould go equity heavy in a stock market downdraft and load equities thus reducing its allocation to bonds.
Another fund that I like and that I own is CFIAX (Columbia Flexible Capital Income) which is held in my hybrid income sleeve. It sports about a 4% yield.
Well said, Level5.
I also like the idea behind COTZX, but for the second and the fourth reason you mentioned, I had decided a while ago against investing in the fund. I also don't particularly like to invest in a fund of other in-house funds, especially, as you pointed out, when "six of the funds 13 funds are invested in 1.56% or less". I prefer that manager(s) go out and select the individual stocks and bonds that are most suitable for the successful implementation of their goals, good examples are the managers of funds like FMSDX and VWINX.
My current choice of an alternative fund is JHQAX. Still quite happy with its risk/reward profile. These three funds, by the way, make up a significant portion of my conservative portfolio.