Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Proportions: I continue to be severely overweight PRWCX, approaching 40% of my stuff. 5 single-stocks = 14% of total. Gonna bring it down to 4, rather than 5. I guess there's no magic recipe for avoiding "Di-worse-ification."
Since we've moved cash we had parked in a MM and a couple bond funds to TRP Cap App & Income (PRCFX), we are back to 95% with DG. 17 years and counting. Whenever I've moved some dollars away from DG through the years it has always cost me money.
Some thought my 10% per fund too high. Than @Roy chimes in @ 95% with Giroux. All my funds are team-managed. None of them can compete with a rock star.
”Well, it's one for the money, Two for the show, Three to get ready, Now go, cat, go!”
I could never understand why anyone has more than 7-8 funds (they are usually the ones who say, there is no right number). You go over 10 funds and you are over-diversified.
What usually happens with over 10 funds? you are not sure and/or you have owned lagging categories for years. You already know that the SP500 beat most funds over 15-20 years so why do you own so many funds? This was my initial start (1995-2000) investing 90+% in VG Total index and the rest in VG growth.
If you are into more analysis looking for generic funds with great risk/reward how can you have more than 8 funds? How many great ideas can you have? I never had more than 5-6 funds.
While most think that you can't find great funds that have done well for years, history proved them wrong. PRWCX has done it. PIMIX did it for 9-10 years.
More at (https://fd1000.freeforums.net/thread/2/generic-ideas) Let's use the above link. How about running a screener every 4-6 funds and buying good risk/reward funds? This way you are not stuck in a lagging category/fund for years.
”I could never understand why anyone has more than 7-8 funds (they are usually the ones who say, there is no right number). You go over 10 funds and you are over-diversified.”
Silly remark from FD. You’ll have a hard time documenting that the number of funds or portfolio holdings alone has an appreciable effect on average return over time.
One example: Leuthold’s LCR (ETF) sports a gold rating at M* and straight 5’s at Lipper (except for 3 on expense). This ETF invests in a basket of other ETFs - currently numbering 32, Maybe you know more about managing assets than these guys do?
Sounds like you might be referring to me in the quoted snippet. I did say the number of funds doesn’t matter in itself. I did not say I have 10 funds. (Go back and read it.) I have only 8 funds which should elicit your great approval as that falls inside your ordained allowable number. There are 2 additional non-fund components in my 10/10 portfolio. One consists of assorted cash holdings (totaling 10%) The other is a group of individual equities in which I have a high conviction. (10% in aggregate)..
You guys have whetted my appetite on the subject of “right number” of funds. My simple math tells me that 10 funds, each averaging 10% a year, should produce the same return as 5 funds, each averaging 10% a year - or one fund for that matter. Further, someone with 3 different accounts (taxable, Roth, Traditional IRA) might find reasons to hold more funds than someone with just one type of account.
I don’t know about “research”? Everybody and his brother on the internet seems to have an opinion on this. But for starters I found this linked article interesting. The author suggests up to 12 funds might be the “right” number for long-time investors with lots of accumulated wealth, while 6 might be a better number for younger / newer investors, This isn’t likely to change my mind, or Mike’s or FD’s or anyone else who’s weighed in. Just something to think about / discuss if so inclined.
"Further, someone with 3 different accounts (taxable, Roth, Traditional IRA) might find reasons to hold more funds than someone with just one type of account."
Exactly! It may be difficult or potentially counter-productive for investors with multiple account types (e.g., 401K, traditional IRA, Roth IRA, taxable, HSA, 529) to hold the "right number" of funds regardless of what some self-proclaimed experts state. Having too many funds can be detrimental (e.g., diworsification, increased portfolio maintenance), but there isn't an arbitrary number of funds which is optimal for every investor's unique situation.
The number of accounts is an excuse. I have 10 accounts(2 brokerages, each with Roth, Rollover for my wife and me + joint/taxable account), but still only 2 funds. Yes, I buy one fund for several accounts. When I used to have 401K, it was usually all in SP500 or US tot index. I used my brokerage accounts for the rest. These 401k choices were mostly indexes anyway. 2 giants Buffett and Bogle have been promoting 1 to 3 funds and indexes. I understand if someone wants others, 5-7 funds are plenty enough. Sure, you can do well with 15 funds (or refuse to admit it), but that is the minority, it's just more complicated and there is plenty of research to prove that indexes and less trading = better performance.
“ … there is plenty of research to prove that indexes and less trading = better performance.”
HA - So you’re going to change the topic now? I’ll make three observations:
- First, I agree that indexes have outperformed active management for a long time.
- Second, I agree that less trading benefits performance and more trading usually hurts it.
- Third, as a percentage of board posts, FD ranks right up there in terms of trades. Around 10% of all his posts mention buys or sells (a fair estimate I think). The difference between FD and most here is that his trades are always referenced in the past - sometimes having occured weeks or months earlier. And, from what I can tell, those posts never mention specific funds,
”Why stop at 15? 30 must be better”
First, you’re insinuating here that someone finds 10 or 15 holdings “better.” It’s not about “better.” It’s about someone’s overall approach to investing. If 5 serves your portfolio positioning, that’s fine. At one time I carried 15-20 holdings, including small allocations to some pretty speculative mining stocks. Due mainly to age, I’ve dumped those small positions and consolidated into a CEF that provides exposure to them with less risk. And, for simplicity’s sake, I’m always evaluating the possibility / desirability of consolidating further.
You might recall @Old_Skeet who used to post here. He wrote a nice weekly summary of his portfolio and his trades. Sometimes he published the entire portfolio. Often it had 30 or more holdings. That’s what fit his needs. Not my cup of tea or yours, but it worked for him.
"The difference between FD and most here is that his trades are always in the past - sometimes by weeks or months. And, from what I can tell, those never mention specific funds."
FD has posted on various investing forums for over a decade. From my recollection, he has never mentioned any trades which lost money. FD either has the highest trading success rate ever known or...
I have been trying to consolidate the IRA to simplify it in case of the sort of stuff that seems more likely to happen as I get older. But I need more help from Mr. Market to get out of some positions..
I have temporarily consolidated the taxable by getting rid of a lot of Vanguard indexes. At the time I sold I decided that I would sit out the market until the next budget standoff and the recovery from holidaze hangovers sets in. Time will tell if I missed out.
I don't mind small positions for the taxable. If they can be left alone, they can turn out alright. And it is my hope to leave them alone. I don't find that they need a lot thinking about, or managing. I do sort of keep an eye on them the way I keep an eye on the trees I have planted.
I don't feel the need to buy the 500. I own tech funds instead. They have been the main driver of growth in that index for many years. But why multiple tech funds? They each do something different. So I think of them as a basket. The techs are FSCSX, TDV, and CSGZX.
I've pretty much stopped paying attention to Lipper and M* labels. The weighting box is still somewhat useful. More useful still are MFO premium and the overlap tool at etfrc.com. So I'm not concerned that I have too much mid cap value because I own PEY and SYLD--two different theses resulting in very little overlap. It is the theses that I am buying. That the weights ends up where they do is not really a factor in my decision to buy.
Before we happened into PRWCX toward the end of 2006, we were invested directly through 8 funds and 4 different fund companies which covered LCG, LCV, SCG, SCV, real-estate and a couple bond funds. I knew nothing about DG at the time other than he and Arricale had been on the job for less than 6 months. We were 43 & 39 years old but it was very apparent my wife had no interest being involved in our investments, so I was looking to simplify in case something ever happened to me. Most advisors would never have recommended PRWCX by itself for investors our age. But, it has worked for us along with our personal high savings rate.
6 years ago we met with a CFP we know who helps advise >$10 billion at the firm he works for and he told us not to change a thing, as we were well on our way to meeting our retirement goals and that his annual advisory fee could not be justified to take over our accounts.
I won't recommend others investing as we have largely chosen to in the last 17 years, but it has worked for us. At ages 60 & 56 current Monte Carlo simulations have us at 99% success rates if we both retire today.
We've been fortunate to work our whole adult lives, live modestly, and to be vigilant about saving and investing which has also allowed us to give regularly to charitable organizations and individuals in need. For all this I take little credit other than to thank God for the opportunities we've been afforded and been able to take advantage of.
Wishing all a wonderful, peaceful and healthy 2024. I don't contribute much to this site, but have learned so much....thank you.
************* Well, yes, I might get cut, but it won't be because I'm trying to catch the knife in mid-air. Just trying to keep things simple. Wifey prefers that I continue to move more from tax-sheltered to taxable. Not so many rules and hoops to jump through, after I'm gone. THAT will be a SLOW process, though. As much as you can depend upon anything, it looks like neither of us is going anywhere permanently for several years, anyhow. (Next birthday= 70. Hers will be age 51.)
Sometimes, reading what all of you folks say, I feel like I'm eavesdropping on a convention of alchemists and necromancers discussing what ingredients to throw into the big black kettles.
"Simple" question: what do you think will generate better results for Joe average investor during his lifetime...holding up to 5 funds and hardly trading, or using 10+ holdings with more trading? Investing is never about emotions and feelings, it's all about numbers.
What I do has nothing to do with the above question and why I didn't mention it, but it's amazing how posters would not deal with the above.
Roy, PRWCX is one of these "exceptions to the rule" where a manager can be great for the long term. I have been recommending it as one of the best "moderate"(not a typical one) allocation funds for over 10 years.
PRWCX is one of these "exceptions to the rule" where a manager can be great for the long term. I have been recommending it as one of the best "moderate"(not a typical one) allocation funds for over 10 years.
Thanks for the tip FD.
Uhh - So you’ve been recommending a closed fund to your friends for 10 years? Good Grief.
"Simple" question: what do you think will generate better results for Joe average investor during his lifetime...holding up to 5 funds and hardly trading, or using 10+ holdings with more trading? [snip]
Let's not conflate trading with the number of funds an investor holds. They're two different topics. There has been ample research indicating investors who trade frequently often fare poorly. You may be familiar with the seminal paper titled “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” by Brad Barber and Terrance Odean.
Your prior post stated: "I could never understand why anyone has more than 7-8 funds (they are usually the ones who say, there is no right number). You go over 10 funds and you are over-diversified. What usually happens with over 10 funds? you are not sure and/or you have owned lagging categories for years. You already know that the SP500 beat most funds over 15-20 years so why do you own so many funds? This was my initial start (1995-2000) investing 90+% in VG Total index and the rest in VG growth."
Regardless of your opinion, there isn't an arbitrary number of funds which is optimal for every investor's unique circumstances. A young investor who is risk tolerant and has many years until retirement can reasonably have only a single fund in their portfolio (e.g., Total World Stock Index fund or target-date fund) if they so choose. Many Bogleheads are fond of a three-fund portfolio often comprised of Vanguard Total Stock Market Index Fund (VTSAX), Vanguard Total International Stock Index Fund (VTIAX), and Vanguard Total Bond Market Fund (VBTLX). This is a good strategy but it may not be right for everyone. Investors with multiple accounts should probably consider fund availability, optimum asset location, tax consequences, risk tolerance, and personal preferences when constructing their portfolios. These considerations can lead to having more funds than you prescribe. Bottom line - there isn't a one-size-fits-all solution.
The S&P 500 performed very well over the trailing 10-year and 15-year periods. It was a very different story during the "Lost Decade" (2000-2009) when the S&P 500 basically went nowhere. Would the average investor with a large S&P 500 position have the fortitude to stick with this investment during the "Lost Decade" or would they have sold before the S&P 500 recovery started? Wouldn't it have been beneficial to also include foreign stocks and/or investment-grade bonds in the portfolio?
...one would have to take into consideration several factors if one decided to limit the number of funds.... key nan risk, reputation, scale and financial strength of the fund company, diversification within reason, drawdown performance, bench strength, age of fund managets....the more I read this thread the more I like TSUMX. Thornburg Summit fund.,. multi asset, invests to outperform inflation, some international exposure, create quote real wealth end quote. Keep it simple, stay invested, some funds too volatile and then you bail at the wrong time.... always...
Comments
”Great work. Your portfolio doesn't appear to be too heavily weighted in the stocks or bonds of any one company.”
LOL
@Crash - Sounds like you’re having a serious love affair with DG.
Since we've moved cash we had parked in a MM and a couple bond funds to TRP Cap App & Income (PRCFX), we are back to 95% with DG. 17 years and counting. Whenever I've moved some dollars away from DG through the years it has always cost me money.
All my funds are team-managed. None of them can compete with a rock star.
”Well, it's one for the money, Two for the show, Three to get ready, Now go, cat, go!”
What usually happens with over 10 funds? you are not sure and/or you have owned lagging categories for years. You already know that the SP500 beat most funds over 15-20 years so why do you own so many funds? This was my initial start (1995-2000) investing 90+% in VG Total index and the rest in VG growth.
If you are into more analysis looking for generic funds with great risk/reward how can you have more than 8 funds? How many great ideas can you have? I never had more than 5-6 funds.
While most think that you can't find great funds that have done well for years, history proved them wrong. PRWCX has done it. PIMIX did it for 9-10 years.
More at (https://fd1000.freeforums.net/thread/2/generic-ideas)
Let's use the above link. How about running a screener every 4-6 funds and buying good risk/reward funds? This way you are not stuck in a lagging category/fund for years.
First, I select allocation+international equity+US equity (link)
Second, select the risk tab on top, then Sharpe + sort Sharp (link)
Third, select overview again (https://fundresearch.fidelity.com/fund-screener/results/table/overview/sharpeRatio3Yr/desc/1?assetClass=BAL%2CDSTK%2CISTK&category=AL%2CCA%2CCH%2CCV%2CDP%2CEI%2CEM%2CES%2CFA%2CFB%2CFG%2CFQ%2CFR%2CFV%2CIH%2CJS%2CLB%2CLG%2CLS%2CLV%2CMA%2CMB%2CMG%2CMQ%2CMV%2CPJ%2CRI%2CSB%2CSG%2CSV%2CSW%2CTA%2CTD%2CTE%2CTG%2CTH%2CTI%2CTJ%2CTK%2CTL%2CTN%2CTU%2CTV%2CWB%2CWG%2CWV%2CXM%2CXQ%2CXY&order=assetClass%2Ccategory).
The above list is sorted by Sharpe from best (high) to low. All you have to do is look at performance for YTD,1,3,5 years.
Funds to consider:
GOODX=MC value
HIMDX=SC value
FMILX=LC value
BISMX/BISAX=SC+MC international value
SP500 is always a choice
Just 5 funds and good diversification.
============
MFO also has a great screener and Charles Lynn Bolin posted great articles about it.
Silly remark from FD. You’ll have a hard time documenting that the number of funds or portfolio holdings alone has an appreciable effect on average return over time.
One example: Leuthold’s LCR (ETF) sports a gold rating at M* and straight 5’s at Lipper (except for 3 on expense). This ETF invests in a basket of other ETFs - currently numbering 32, Maybe you know more about managing assets than these guys do?
Sounds like you might be referring to me in the quoted snippet. I did say the number of funds doesn’t matter in itself. I did not say I have 10 funds. (Go back and read it.) I have only 8 funds which should elicit your great approval as that falls inside your ordained allowable number. There are 2 additional non-fund components in my 10/10 portfolio. One consists of assorted cash holdings (totaling 10%) The other is a group of individual equities in which I have a high conviction. (10% in aggregate)..
I don’t know about “research”? Everybody and his brother on the internet seems to have an opinion on this. But for starters I found this linked article interesting. The author suggests up to 12 funds might be the “right” number for long-time investors with lots of accumulated wealth, while 6 might be a better number for younger / newer investors, This isn’t likely to change my mind, or Mike’s or FD’s or anyone else who’s weighed in. Just something to think about / discuss if so inclined.
Exactly!
It may be difficult or potentially counter-productive for investors with multiple account types
(e.g., 401K, traditional IRA, Roth IRA, taxable, HSA, 529) to hold the "right number" of funds
regardless of what some self-proclaimed experts state. Having too many funds can be detrimental
(e.g., diworsification, increased portfolio maintenance), but there isn't an arbitrary number of funds
which is optimal for every investor's unique situation.
2 giants Buffett and Bogle have been promoting 1 to 3 funds and indexes. I understand if someone wants others, 5-7 funds are plenty enough.
Sure, you can do well with 15 funds (or refuse to admit it), but that is the minority, it's just more complicated and there is plenty of research to prove that indexes and less trading = better performance.
Why stop at 15? 30 must be better.
HA - So you’re going to change the topic now? I’ll make three observations:
- First, I agree that indexes have outperformed active management for a long time.
- Second, I agree that less trading benefits performance and more trading usually hurts it.
- Third, as a percentage of board posts, FD ranks right up there in terms of trades. Around 10% of all his posts mention buys or sells (a fair estimate I think). The difference between FD and most here is that his trades are always referenced in the past - sometimes having occured weeks or months earlier. And, from what I can tell, those posts never mention specific funds,
”Why stop at 15? 30 must be better”
First, you’re insinuating here that someone finds 10 or 15 holdings “better.” It’s not about “better.” It’s about someone’s overall approach to investing. If 5 serves your portfolio positioning, that’s fine. At one time I carried 15-20 holdings, including small allocations to some pretty speculative mining stocks. Due mainly to age, I’ve dumped those small positions and consolidated into a CEF that provides exposure to them with less risk. And, for simplicity’s sake, I’m always evaluating the possibility / desirability of consolidating further.
You might recall @Old_Skeet who used to post here. He wrote a nice weekly summary of his portfolio and his trades. Sometimes he published the entire portfolio. Often it had 30 or more holdings. That’s what fit his needs. Not my cup of tea or yours, but it worked for him.
FD has posted on various investing forums for over a decade.
From my recollection, he has never mentioned any trades which lost money.
FD either has the highest trading success rate ever known or...
I have 12 individual stocks, 10 CEFs, 5 ETFs, and 6 Mutual funds...up 9% in 2023.
I have been trying to consolidate the IRA to simplify it in case of the sort of stuff that seems more likely to happen as I get older. But I need more help from Mr. Market to get out of some positions.
I have temporarily consolidated the taxable by getting rid of a lot of Vanguard indexes. At the time I sold I decided that I would sit out the market until the next budget standoff and the recovery from holidaze hangovers sets in. Time will tell if I missed out.
I don't mind small positions for the taxable. If they can be left alone, they can turn out alright. And it is my hope to leave them alone. I don't find that they need a lot thinking about, or managing. I do sort of keep an eye on them the way I keep an eye on the trees I have planted.
I don't feel the need to buy the 500. I own tech funds instead. They have been the main driver of growth in that index for many years. But why multiple tech funds? They each do something different. So I think of them as a basket. The techs are FSCSX, TDV, and CSGZX.
I've pretty much stopped paying attention to Lipper and M* labels. The weighting box is still somewhat useful. More useful still are MFO premium and the overlap tool at etfrc.com. So I'm not concerned that I have too much mid cap value because I own PEY and SYLD--two different theses resulting in very little overlap. It is the theses that I am buying. That the weights ends up where they do is not really a factor in my decision to buy.
FD must be related to the Pope and my mother.
6 years ago we met with a CFP we know who helps advise >$10 billion at the firm he works for and he told us not to change a thing, as we were well on our way to meeting our retirement goals and that his annual advisory fee could not be justified to take over our accounts.
I won't recommend others investing as we have largely chosen to in the last 17 years, but it has worked for us. At ages 60 & 56 current Monte Carlo simulations have us at 99% success rates if we both retire today.
We've been fortunate to work our whole adult lives, live modestly, and to be vigilant about saving and investing which has also allowed us to give regularly to charitable organizations and individuals in need. For all this I take little credit other than to thank God for the opportunities we've been afforded and been able to take advantage of.
Wishing all a wonderful, peaceful and healthy 2024. I don't contribute much to this site, but have learned so much....thank you.
*************
Well, yes, I might get cut, but it won't be because I'm trying to catch the knife in mid-air. Just trying to keep things simple. Wifey prefers that I continue to move more from tax-sheltered to taxable. Not so many rules and hoops to jump through, after I'm gone. THAT will be a SLOW process, though. As much as you can depend upon anything, it looks like neither of us is going anywhere permanently for several years, anyhow. (Next birthday= 70. Hers will be age 51.)
Investing is never about emotions and feelings, it's all about numbers.
What I do has nothing to do with the above question and why I didn't mention it, but it's amazing how posters would not deal with the above.
Roy, PRWCX is one of these "exceptions to the rule" where a manager can be great for the long term. I have been recommending it as one of the best "moderate"(not a typical one) allocation funds for over 10 years.
Uhh - So you’ve been recommending a closed fund to your friends for 10 years? Good Grief.
They're two different topics.
There has been ample research indicating investors who trade frequently often fare poorly.
You may be familiar with the seminal paper titled “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” by Brad Barber and Terrance Odean.
Your prior post stated:
"I could never understand why anyone has more than 7-8 funds (they are usually the ones who say, there is no right number). You go over 10 funds and you are over-diversified. What usually happens with over 10 funds? you are not sure and/or you have owned lagging categories for years. You already know that the SP500 beat most funds over 15-20 years so why do you own so many funds? This was my initial start (1995-2000) investing 90+% in VG Total index and the rest in VG growth."
Regardless of your opinion, there isn't an arbitrary number of funds which is optimal for every investor's unique circumstances. A young investor who is risk tolerant and has many years until retirement can reasonably have only a single fund in their portfolio (e.g., Total World Stock Index fund or target-date fund) if they so choose. Many Bogleheads are fond of a three-fund portfolio often comprised of Vanguard Total Stock Market Index Fund (VTSAX), Vanguard Total International Stock Index Fund (VTIAX), and Vanguard Total Bond Market Fund (VBTLX). This is a good strategy but it may not be right for everyone. Investors with multiple accounts should probably consider fund availability, optimum asset location, tax consequences, risk tolerance, and personal preferences when constructing their portfolios. These considerations can lead to having more funds than you prescribe. Bottom line - there isn't a one-size-fits-all solution.
The S&P 500 performed very well over the trailing 10-year and 15-year periods.
It was a very different story during the "Lost Decade" (2000-2009) when the S&P 500 basically went nowhere.
Would the average investor with a large S&P 500 position have the fortitude to stick with this investment
during the "Lost Decade" or would they have sold before the S&P 500 recovery started?
Wouldn't it have been beneficial to also include foreign stocks and/or investment-grade bonds in the portfolio?
Baseball fan