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Slicing and Dicing Conservative Allocation Funds

beebee
edited March 2015 in Fund Discussions
I find that this M* category (Conservative Allocation) has some of the most "diverse" active strategies that attempt to achieve what M* defines as:

"...portfolios that seek to provide both capital appreciation and income by investing in three major areas: stocks, bonds, and cash. These portfolios tend to hold smaller positions in stocks than moderate-allocation portfolios. These portfolios typically have 20% to 50% of assets in equities and 50% to 80% of assets in fixed income and cash."

M* source:
morningstar defines Conservative_Allocation_Category

For example DIFIX has a stock portfolio that focuses on Real Estate and Finance and a bond portfolio that is highly concentrated in High Yield bonds. USBLX and VTMFX seem to favor holding stocks using the S&P 500 index and holding mostly tax free Municipal Bonds.

The list of conservative allocation funds with long term success based on,
- beating its 1, 3, and 5 year category average of 4.29%, 6.14% & 7.01%,
- having reasonable expense ratio of under 1%,
- requiring less than $5K to invest,
- having a M* ranking of 4* or 5*,
- and not charging a load
is displayed below:

image



Comments

  • linter
    wow. i don't recognize but one or two of the funds on that list. no VWINX?
  • davidrmorandavidrmoran
    Seems AOM qualifies, hard to tell since it's not easy to find sites that graph ETFs as growth of $10k instead of NAV.
  • beebee
    edited March 2015
    linter said:

    wow. i don't recognize but one or two of the funds on that list. no VWINX?

    Doing a little charting I compared VWINX and my screen list and as you point out it provided a different story so I apologize for my exclusion of VWINX. VWINX out performed all but three of the funds on my list over the most up to date 5 year period.

    Here's the three funds that out performed VWINX (DIFIX, PGDIX, and COTZX) over the most recent 5 year period:

    image

    What VWINX did in 2007-2009 extremely well was protect to the downside. Here is VWINX charted against two of the three funds that existed 10 year ago:

    image
  • linter
    yup, those three sure have outperformed the last few years. but for CA funds, they seem to display a lot of volatility on the chart -- or at least compared to VWINX, they look like they do. thanks for the work!
  • TedTed
    @bee: Here is a list of Conservative Alocation Funds ranked by U.S. News & World Report:
    Regards,
    Ted
    http://money.usnews.com/funds/mutual-funds/rankings/conservative-allocation
  • LeroyLeroy
    edited March 2015
    After spending many evenings slicing, dicing, and contemplating a bunch of "set and forget" funds, in 2013 I bought Wellesley. It is 20% of my portfolio and I'm a happy camper.

    Its long-term record, considering volatility, is hard to beat: Since inception in 1970 it has returned 10.06% annualized; its worst yearly return was in 2008 at -9.8%.

    So for 45 years it has returned essentially what the stock market has returned, but with much less volatility (beta .53).
  • TedTed
    @Leroy: Good choice, but a better bet Vanguard Fund is( VWELX 8.33% for 86 years) which has outperformed VWINX 1-15 years.
    Regards,
    Ted
  • davidrmorandavidrmoran
    >> 45 years it has returned essentially what the stock market has returned,

    I must be missing something. Since origin, summer 1970, it has more than doubled SP500.

    Wellington and DODBX have done notably better, but Windsor, FCNTX, and SEQUX have all done multiples better, Sequoia 6x or so. If I am reading the graphs right.
    Some manager changes in there, of course.
  • LeroyLeroy
    Ted: Yes but with a higher beta. I wanted a "set and forget," and Wellesley fit in better with the rest of my portfolio allocation.
  • JohnChisum
    The volatility of Wellington is much higher than of Wellesley.
  • LeroyLeroy
    davidrmoran said:

    >> 45 years it has returned essentially what the stock market has returned,

    I must be missing something. Since origin, summer 1970, it has more than doubled SP500.

    According to records, the S&P has returned about 10.5% since 1926, with returns reinvested; Wellesley 10.06% since 1970. That was what I was comparing. What the S&P has done since 1970, I don't know. I didn't even consider that.:(
  • linter
    edited March 2015
    VWINX is conservative allocation and VWELX isn't, so, in terms of this discussion, how the two of them compare isn't relevant. imho.

    BTW / US News' charts aren't adjusted for distributions, which to me makes them utterly worthless. That is one thing M* gets right.
  • Mona
    davidrmoran said:

    I must be missing something

    :)

  • TedTed
    @John Chisum: Never confuse risk and volatility, they are not the same.
    Regards,
    Ted
  • davidrmorandavidrmoran
    Someone said 45y, so that was what I looked at. 'Missing something' was being polite. Would not compare 45y with 89y.
  • JohnChisum
    Ted said:

    @John Chisum: Never confuse risk and volatility, they are not the same.
    Regards,
    Ted

    Okay, let me restate; the fund has higher risk and higher volatility.

    @linter makes the point that these funds are in different classes so any comparison is not worthwhile in this discussion.

  • hank
    edited March 2015
    Ted said: "Never confuse risk and volatility, they are not the same."

    Yeah. I hear that a lot. Maybe, But, I'll submit that if you're 95 years old, they are very much the same.
  • Old_Skeet
    edited March 2015
    I have a sleeve (hybrid income) within my portfolio that holds mostly conserative allocation funds and account for just short of 20% of the overall portfolio. The funds held within this sleeve are AZNAX, FKINX, ISFAX, CAPAX, PGBAX, & PASAX.

    I am very happy, thus far, with their performance over the years and have held one of them (FKINX) for better than fifty years.

    Old_Skeet
  • JohnChisum
    @hank, I hear ya. It is true not to confuse the two but they have inherent linkages to each other as well. It is not as clean cut as some would say.
  • Tampabay
    Everyone needs a Hull for a boat to Float, rudder & motor comes later...
  • hank
    edited March 2015
    My 2 cents. Slicing, dicing, sleveing & cleaving all work for some people. Some of the benefit is from what I refer to as the "Dumbo Effect. " If you're my age, you likely learned a story in grade school about Dumbo the elephant who learned that by having confidence a magic feather he held onto he could fly - and he did! (The story was used to teach kids to have self confidence.) Don't laugh. A lot of successful investing comes from having confidence in your approach. Believing in it so much that temporary setbacks don't cause you to sell everything at the worst possible time and run for high ground and locking in losses.

    A second benefit of the "slice em & dice em" approach is that it leads to rebalancing. Not all slices appreciate at the same rate or speed. So over time a smart investor may lighten up on his best performers periodically and re allocate the gains into investments that still have a lot further to run.

    I like to slice and dice as much as anyone. Some of the slices are downright irrational. PRWCX is in the "equity" folder. OAKBX is in the "hybrid" folder along with the likes of PRPFX. While DODBX is placed in the "balanced" folder. Since all three funds are very similar, it's very likely the slicing and dicing here has meaning to no one else but myself.

    FWIW

  • beebee
    edited March 2015
    hank said:

    My 2 cents. A lot of successful investing comes from having confidence in your approach. Believing in it so much that temporary setbacks don't cause you to sell everything at the worst possible time and run for high ground and locking in losses.

    A second benefit of the "slice em & dice em" approach is that it leads to rebalancing.

    I like to slice and dice as much as anyone. Some of the slices are downright irrational. PRWCX is in the "equity" folder. OAKBX is in the "hybrid" folder along with the likes of PRPFX. While DODBX is placed in the "balanced" folder. Since all three funds are very similar, it's very likely the slicing and dicing here has meaning to no one else but myself.

    Thanks for your views on these types of funds...especially to the point that these funds are found in different (or seemingly different) M* categories...balanced, hybrid, conservative, retirement income, world allocation and moderate. This often requires investors to look not only under the hood, but in different 'hoods.


  • ron
    Surprised no one ever mentions AABPX except me, which I bought last year after doing my DD at age 81 and staying pretty conservative with a mix of funds and stocks and
    alot of patience.
  • 00BY
    EXDAX and EXBAX tend not to outperform in bull markets. They are built more for downside protection and do well over a full market cycle.
  • Kaspa
    BERIX would be my choice if I were to buy a conservative allocation fund.
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