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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.
  • Portfolio Construction Help
    Well, he did say that both retirement and non-retirement accounts were involved.
  • Portfolio Construction Help
    AFAIK, You cannot consolidate Retirement accounts (IRA, 401k) etc. under joint-accounts. These accounts are personal. You can only have joint accounts for taxable accounts. Am I missing something?
  • Portfolio Construction Help
    Hello folks. I recently consolidated several retirement and non-retirement accounts for both myself and my wife into a new joint Fidelity account. Now that we have everything under one roof, I am considering making some major changes (almost starting over) in order to get things right and build a thoughtful portfolio for the yrs ahead. I have some good ideas of what I'd like to do based on my own investment experience, David's writings and the great dialogue on this discussion board. Nonetheless, I'd love to hear how some of you would construct a new retirement portfolio based on a hypothetical $100,000. We are 35 yrs old. Assuming a clean slate and a 20 yr horizon, how would you allocate this money? Many thanks in advance!
  • Our Funds Boat, Year-End, + 13.04%, 12-31-12
    Reply to @catch22:
    Hi Catch,
    FLPSX is about 5% of my total retirement portfolio. I have not made any changes to this position. I'm happy with the fund.
    I've made several changes to my portfolio at year end.
    I've sold PRPFX to buy 1/2 PONDX, 1/4 SUBFX and 1/4 RWGFX.
    I've reduced FDGRX to add more to RWGFX.
    I've reduced ARTKX and FMIJX and added the proceeds to create roughly equal allocation to ARTHX, ARTRX, GPGOX and GPIOX.
    There are some other small changes at the margin that does not change the overall character.
    I think RWGFX is similar to FDGRX in terms of asset style (growth stocks) but on down quarters it seems to have better downside performance.
  • Our Funds Boat, Year-End, + 13.04%, 12-31-12
    Howdy,
    A thank you to all who post the links, start and participate in the many fine commentaries woven into the message threads.
    For those who don't know; I ramble away about this and that, at least once each week. The perspectives and investments are based, not upon a formal economic studies background; but from the "School of Hard Knocks & Studies", in which, we are still enrolled.
    NOTE: This portfolio is designed for retirement, capital preservation and to stay ahead of inflation creep. This is not a buy and hold portfolio, and is subject to change on any given day; based upon perceptions of market directions. All assets in this portfolio are in tax-sheltered accounts; and any fund distributions are reinvested in the funds. Gains or losses are computed from actual account values.
    While looking around....."The bells are ringing for me and my bonds" or perhaps "Bonds on the Run" (from; Me and My Gal, Judy Garland/Gene Kelly, 1942, & Band on the Run, Paul McCartney/Wings, 1973). Numerous bond death announcements continue; and causes one to wonder whether they may awake from a deep sleep to find a neat stack of paper bonds upon their bed with blood streaming down the paper edges, not unlike hot chocolate poured upon one's favorite cake top. There has been a 10% increase in the yield of the 10 yr Treasury during the past few weeks. Is this a sign from the great bond gods? I don't know. All of us enjoy a well thought critique of an investment area. Whether I read a report about the equity or bond sectors; and an author states that this or that is go'in to hell in a hand basket, I will surely expect supporting details. Be as critical and watching of supporting evidence as possible; not just a statement from a perpetual equity bull. Yes, I include myself in this, too; be it equity or bond articles. I am picking on bonds and related stories now, because of all of the banner chat and headlines recently.
    A few data trinkets related only to Fido funds and year 2012: U.S. oriented equity funds (51) returns ranged from +11.3 through +29% (avg.=+17.4%), Int'l equity funds (29) returns ranged between +4.1 through +36% (avg.=+19%) and Fido's select sector funds (39) ranged between +2.4% through +38% (avg.=+17.2%) (excluding their gold fund).
    Equity or bond; there will be the happy and not so happy among them.
    In the end, some bond funds will be happier than others with a sustained yield increase. Too many variables exist among active managed funds, etf's or indexes to determine the winners today.
    As to the bond fund choices for us and their resulting managers, or lack of management; the range is far and wide, not unlike the equity world. Would you prefer government, corporate, muni or high yield? Where on the planet would you like the bond mix; U.S., Europe, Japan, perhaps emerging market debt? Quality. Would that be investment grade or down the ladder of qualilty into the junkiest stuff around? The same questions have to be asked of equity investments. For a taste of each area, one could get a little of each. Buy Verizon equity for quality of the stock and bond issues. Buy Frontier Communications (who bought, among other stuff; the throw aways of Verizon) and get a bit junker equity and bond offering. The same applies between Comcast and Charter Communications (cable provider). Comcast is in cruise mode at the time, more or less. Charter is playing in bankruptcy land. One pretty good and the other is trying to dig out of a hole. Combining the four, one may find a comfort zone between the stock and bond issues.
    Stock etf list
    Bond etf list
    Perhaps a fully happy list of funds blended between bonds and equities; with the selected funds having their own balance, too; bond and equity funds with the full flexibility to "go with the flow" for their given mandate. Make a list of 10 each; to compensate for management problems here and there, and plant the money.
    Lastly, as to the death of some bonds via a substantial and continued yield increase. I can not add anything further to what I or others have already detailed here during the past several months.
    The futures have a real equity fire going as of Jan. 1, 5pm EST and perhaps some bonds will get burned tomorrow or for the remainder of this week, month or year.
    Added note: Our 529 educational account is a straight forward 50/50 of VITPX and VBMPX, and managed an average of 10.4% for 2012. Our house will have to continue to review the more laggard funds we have, potential impacts and the hardest part; whether and/or what to sell and where to move the monies.
    As to the funds list below, I had added after the tickers; the year return data. As to be expected with any holdings; there were some helpers and some laggards.
    Good fortune to you, yours and the investments.
    Take care,
    Catch
    ---Below is what M* x-ray has attempted to sort for our portfolio, as of Nov. 1, 2012 ---
    From what I find, M* has a difficult time sorting out the holdings with bond funds.
    U.S./Foreign Stocks 1.9%
    Bonds 93.9% ***
    Other 4.2%
    Not Classified 0.00%
    Avg yield = 3.99%
    Avg expense = .57%
    ***about 18% of the bond total are high yield category (equity related cousins)

    ---This % listing is kinda generic, by fund "name"; which doesn't always imply the holdings, eh?
    -Investment grade bond funds 28.2%
    -Diversified bond funds 22.4%
    -HY/HI bond funds 14.5%
    -Total bond funds 32.4%
    -Foreign EM/debt bond funds .6%
    -U.S./Int'l equity/speciality funds 1.9%
    This is our current list: (NOTE: I have added a speciality grouping below for a few of fund types)
    ---High Yield/High Income Bond funds
    FAGIX Fid Capital & Income +16.4%
    SPHIX Fid High Income +14.9%
    FHIIX.LW Fed High Income +14.3%
    DIHYX TransAmerica HY +14.9%
    ---Total Bond funds
    FTBFX Fid Total +6.5%
    PTTRX Pimco Total +10.4%
    ---Investment Grade Bonds
    ACITX Amer. Cent. TIPS Bond +6.1%
    DGCIX Delaware Corp. Bd +14.9%
    FBNDX Fid Invest Grade +6.2%
    FINPX Fidelity TIPS Bond +6.5%
    OPBYX Oppenheimer Core Bond +10.2%
    ---Global/Diversified Bonds
    FSICX Fid Strategic Income +10.9%
    FNMIX Fid New Markets +20%
    DPFFX Delaware Diversified +7.1%
    LSBDX Loomis Sayles +15.1%
    PONDX Pimco Income fund (steroid version) +21.9%
    PLDDX Pimco Low Duration (domestic/foreign) +5.9%
    ---Speciality Funds (sectors or mixed allocation)
    FRIFX Fidelity Real Estate Income (bond/equity mix) +18.9%
    ---Equity-Domestic/Foreign
    NONE outright, with the exception of equities held inside some of the above funds.
  • Ordinary Americans Are Losing Faith In Stocks
    Reply to @MikeM/BobC:
    You folks are probably right. I think there could be a large corrections coming soon/or crash . If I was few years out from retirement, I would consider waiting for the rally to start, then probably sell everything/change my portfolio to 70s% bonds/ 30s% stocks. This would work for your buy low and sell high. I think we are at a somewhere past the past 3rd or start of 4th quarter of the rally.
    http://finance.yahoo.com/news/trader-advice-expect-rally-then-115954948.html
  • Ordinary Americans Are Losing Faith In Stocks
    Reply to @BobC: Right on Bob. It's well documented that your typical investor sells low and buys high. I've certainly been guilty of that myself. It's been a learning experience for me to look longer term when you find your assets have dropped.
    I also think the "general" American is getting older and closer to retirement. That would make them more conservative and likely to reduce equity holdings.
  • Wish You Were Here: Spooked Investors Miss Out On $200B Gain
    This might be long. On Election Day 2000, on my way to work, at 5AM, in the dark, I was in a car wreck that crippled me. A 19 year old kid fell asleep at the wheel, crossed the line on the highway, and hit me head on. It's spilt milk now for everyone but me. I can't tolerate being in a car in the dark with on-coming headlights. I now know that the safest, defensive driver IS NOT in control. My brain just doesn't work the same as before when I am driving.
    I fully understand the feelings of ordinary people about their so-called investments. First, as someone who was employed in a mathematically literate environment that was not professional financiers, I can witness that most small "investors" consider themselves as savers (saving for retirement) and not investors. They were told to set it and forget it and they would end up with far more money in the long run than any "safer" avenue would produce. They were told that houses weren't living quarters; they were investment avenues to ever increasing fortunes. In short, "don't worry be happy".
    Then as boomers entered their 50s, tides changed direction. Boom, boom, boom. Bust, bust, bust. After the last bust, data started emerging. Financiers were skimming their fortunes; they could have just bought bonds over those years; no cushy retirement for Joe the Engineer and Suzie the PhD scientist.
    Each bust was followed by a bubble of some sort. Gimme one more bubble and I'll learn to play the game. Whoa, that last one was housing; nobody was talking about that one! I can't win.
    How do I know this? The engineers, etc. that I worked with thought, incorrectly, that I was the investment queen because I moved my money out of harm’s way just at the right time. (They failed to notice that I had a hard time hitting the "get back in" at the right time.) So they came running when they heard about the banking crisis. Engineers live by a cost/benefit or cost/risk/benefit. They react poorly to risk that, it seems, cannot be assessed but seems to be something other than discussed in the prospectus. (Enter HFT, government bailouts, liquidly traps - oh, just everything that isn't predictable even if the buzz words in the prospectus can be construed to have covered it.)
    Remember, they are savers, not investors.
  • A 21st Century Investment Strategy
    Hi Guys,
    The active-passive portfolio management debate is legitimate. Which approach is most attractive to an individual investor depends, to a large extent, upon time horizon, on risk profile, and on goals.
    Likewise, the Efficient Market Hypothesis (EMH) and its companion Modern Portfolio Theory (MPT) are legitimate subjects of controversy. Both the EMH and MPT are evolving models, and models are always simplified versions of the real world. Ultimately, their legitimacy rests upon the robustness of their assumptions and upon their success in reproducing historical data.
    The EMH and MPT do yield some deployable insights, but also suffer from warts. For example, on the positive side, these concepts introduced risk considerations into investment assessments. On the negative side, they are not perfect formulations like hard physics laws; nothing new or exciting here.
    From my earlier postings, I’m sure you all realize that I am a proponent for a mixed passive-active total portfolio. A total commitment to either strategy escapes me; a complete commitment is not necessary. Since retirement, I have gravitated more heavily towards the passive end of that mix.
    I fully recognize the limitations and imperfections of both the EMH and MPT, but conclude that they offer positive guidelines to foster more robust portfolio construction. We certainly are not fully rationale investors, but we strive for that esoteric goal. Standard deviation (volatility) is certainly not a complete measure of risk. Risk is truly multidimensional in character and has many measures (value at risk, maximum loss for a specified timeframe, Sortino Ratio), and standard deviation is merely one of them. But it is a significant risk component, especially when assessing the longevity of a drawdown retirement portfolio.
    I used these investment concepts with the historical market returns database when making my retirement date and my portfolio withdrawal rate decisions. I remember when Peter Lynch improperly recommended a permissible drawdown schedule at a 7 % annual rate. I used a Monte Carlo code to refute that overly optimistic judgment. The actual drawdown reality is closer to a more conservative 4 % allowable rate that will sustain a retirement portfolio over the long haul.
    The volatility (variability, standard deviation) of annual market returns is the primary culprit to the diminished permissible withdrawal rate for portfolio sustainability. Monte Carlo simulations use randomly selected returns from statistical sets of input data that model expected returns from various asset classes to drive their analytical solutions. The Monte Carlo approach is the direct progeny from MPT and Markowitz’s portfolio asset selection theory.
    The basic finding from these analyses is that asset class diversification realizes a portfolio volatility reduction outcome (by factors from 1.5 to 2.0) while simultaneously maintaining a constant expected returns level. During the required service lifecycle of the owners portfolio (usually 20 to 30 years), that reduction in annual returns volatility dramatically increases the portfolio’s survival rate prospects (survival likelihood, the odds or probabilities of survival) for any required drawdown schedule. Alternately, if a higher withdrawal rate is deemed necessary, the reduced portfolio volatility enhances the portfolio’s survival chances.
    The portfolio owner gets to choose his own poison, but risk control, in terms of attenuated portfolio standard deviation. is a powerful and easily implemented tool to decrease bankruptcy likelihood during retirement.
    None of this stuff is unknown to the seasoned members of the MFO community. However, it just might be an eye opener for a few neophyte investors. An endless list of books exhaustively cover this topic. Within that array, I often recommend a freebie written by fund advisor Frank Armstrong. It is a clearly and concisely composed summary of the subject matter. The title of the book is “Investment Strategies for the 21st Century”. Here is a Link that will secure you a complimentary copy:
    http://thetaoofwealth.files.wordpress.com/2012/09/investment-startegies-for-the-21st-century-by-frank-armstrong.pdf
    I do not quarrel with much that Armstrong integrated into his investment and retirement guide. Enjoy.
    Recently I discovered that the Armstrong organization prepared several videos that succinctly summarize many of the tenets reported in his book. The following two Links provide the basic philosophy and rules that Armstrong advocates. Each is a little over 10 minutes in running length. Armstrong and his staff have remained constant proponents for an Index-dominated investment approach for decades. The EMH and MPT provide a semi-theoretical anchor for their philosophy. Here are the YouTube Links that are especially directed at folks nearing or entering retirement:

    The Link to the Part 2 session is:

    These videos have a concise crystal clarity that is expected when written and delivered by a man with military training and experience. The marching orders are clearly defined; the confusion factor is largely eliminated.
    You may not agree with the message, but the message is not muddied with spurious allusions to the gambling arena that are, at best, loosely coupled to the investment discipline.
    Armstrong emphasizes that costs and taxes always matter. Surely the croupier gets his share, but that can be mostly contained. When viewed globally, history demonstrates that it is not a zero sum game. It becomes a less-than-zero-sum game for the active fund cohort only when contrasted against a passively managed benchmark. That realization itself should be an approach selection buying signal for uncommitted investors.
    Frank Armstrong is decidedly in the globally diversified Index-product camp. He evaluated and rejected other investment policy options. William Bernstein, of Efficient Frontier fame and author of “The Four Pillars of Investing” strongly endorses Armstrong’s work and ethics. I mostly (not completely) join in that expanding chorus that now includes a growing group of institutional investors.
    Please take a few moments to explore the Links that I have assembled. In short order, they will reward you with valuable investment lessons.
    I grant that the lessons are not particularly kind or forgiving to the active fund management and investment advisor professions, but that is the commonsense conclusions arrived at from Armstrong’s extensive practical experience. There is still plenty of headroom for legitimate disagreement on this controversial subject matter.
    Happy New Year everyone.
    Best Regards.
  • new roth ira
    Vanguard kept its STAR fund open to investors with just $1K to invest - they felt it provided a good broad market exposure for investors just starting out. There's something to be said for a new investor not going 100% into stocks. I can still remember being anxious about investing at all (you mean I can lose money?). STAR lets young people get their toes wet.
    More recently, Vanguard created its Target Retirement funds. These too have $1K minimums. The Target 2060 Fund VTTSX (that's as far out as Vanguard goes) is a mix of the funds you recommend - Total Stock Market and Total Int'l Stock, with about 10% of Total Bond Market II thrown in. (Why, you ask, Bond Market II? I ask the same thing.) This might be a reasonable alternative, still following your thinking.
    This fund does have a hometown bias - it's 7:3 domestic/foreign. The mix in the real world is closer to 1:1, as you suggest. And the fund does gradually shift its stock/bond mix, but not for about 22 years.
    If you like the 1:1 mix, then why not just go with VTWSX (currently about 4:5 domestic/foreign)? This fund has a $3K min, so by sticking with one fund, one doesn't have to go the ETF route (VT).
  • Any opinion about TFS Hedged Futures TFSHX ?
    Andrei and Scott thanks for taking the time to respond. I understand the funds, and their appeal to some investors but by and large I still believe that most folks can get along without them. That doesn't mean we can't discuss them, use them or think about them. If it works for you I'm cool with it. For me it just doesn't seem to make sense to have a 10% or less hedging/shorting strategy, maybe even far less than 10% because you will never fully know how hedged/shorted these funds are. That's why I said if you wanted that type of allocation then give the fund manager all of your money. Otherwise these funds just seem like you're trying to head up river backwards or with an anchor in the water.
    The reason I referenced 401k's is that I believe that's where most folks get their exposure to mutual funds. I don't have any figures to show you but I believe that those of us who go out and purchase a mutual fund on our own outside of work retirement plans, and/or without the help or assistance of some financial adviser or planner are quite small in number. When I see alt funds I often wonder who is the audience they're targeted at.
  • Worried about Wasatch
    Wasatch seems to be going the way of Royce. They close funds sometimes, reopen them, close others, launch newer, similar funds.
    Recently they closed Wasatch Emerging Market Small Cap (WAEMX). Now WTF are they doing opening Wasatch Emerging Markets Select (WAESX). Sounds to me they are not interested in retirement of their shareholders, but instead have a plan to fund their own retirement plans.
    I'm inclined to simply bail and run.
  • Mutual Fund Firms Fund Flows: In/Out
    Reply to @Old_Joe: Around 2009, I was in a 401k plan that featured American Funds funds that were no-load share classes. I believe they were R-3 or R-5 share classes. The R class you get in retirement plan depends on how much record keeping/administrative services are to be performed by American funds and how much your company is willing to contribute to running the plan (if they pay out of company funds or let you pay with higher expenses)
    For example: Growth Fund of America

    Ticker Class ER Load
    ------ ----- ---- ----------------
    AGTHX A %0.71 %5.75 (Front)
    AGRBX B %1.46 %5.00 (Deferred)
    GFACX C %1.49 %1.00 (Deferred)
    GFAFX F1 %0.68 -
    GFFFX F2 %0.44 -
    RGAAX R1 %1.44 -
    RGABX R2 %1.41 -
    RGACX R3 %0.98 -
    RGAEX R4 %0.69 -
    RGAFX R5 %0.39 -
    RGAGX R6 %0.34 -

    I believe they do have sometimes F-3 and also various 529 share classes as well.
  • Bond Fund Performance During Periods of Rising Interest Rates
    Howdy MoneyGrubber,
    Fundalarm provided excellent points for consideration, relative to what type of bond fund, some diversification away from 90% equity exposure with a bond fund and looking forward as to what will be driving forces in the future to cause changes with interest rates moving higher.
    You used PTTRX as a core bond fund example. I would expect this fund to continue to be able to manage interest rate swings; as well as many other broad based bond funds. Is this your core bond fund?
    This discussion thread, in part; was based around this statement, " "If interest rates and inflation move quickly up". Quickly is relative to folks in their own time frame, eh?
    Using the 10 year Treasury note as an example and that the current yield has been hanging out in the 1.6% range for many months; my view of quick for upward yield changes would currently be a .1% average weekly upward yield move for 6 to 8 weeks. If such upward yield moves, at a point in time in the future; could be maintained without some pull backs of consequence, I would have to assume a trend has begun. As noted previously, there should have already been other areas (upward equity prices for one) that would be showing strong positives, also which have suststained upward moves.
    It is easy, among all of the other investment areas, with numerous talking and written opinions (from any source) and one's own convictions and knowledge towards their own portfolios; to try to find and then determine what to watch for clues that may affect one's portfolio.
    As to watching, I do pay attention to the 10 year Treasury note yields. It is very easy to glance at this number at one of the tv business channels and be ho-hum about the yield number; but today this number is so small, that small changes are large percentage numbers that would not be ignored in the equity world. If one finds a sustained move from a current 1.6% to 1.7% yield in one week; the change is +6.25%. This number would be big talk in the equity world, eh? The following week finds a similar .1% upward yield move, with the 10 year now parked at 1.8%. The change is now at +12.5% in a two week period. After 8 weeks of similar moves, and now finding the 10 year yield at 2.3%; also finds the change equaling a 43.8% move reflected. Of course, bond prices would have moved downward during this same period. In theory, the downward pricing would have first been shown in plain jane Treasury issues, as well as etf's which follow these issues and closely related bonds. Likely, the best clues as to a fading bond market would be the actively managed bond funds; with pricing being reflected in the abilities and/or luck of management. IF broad based, active managed bond funds are able to manuver through the interest/yield rate increases with available adjustment tools, an investor being in the "right" bond fund should not suffer major losses. This does not mean that one should ignore their active managed bond fund for downward moves that are sustained. We all know a long list of active managed bond funds will always find funds at the bottom of the list; both during the good and bad times. Not unlike we individual investors, the professionals and highly trained/skilled will miss the boat from time to time.
    Another aspect of considering when to sell a fund is "when did I buy it?" None of us ever want to give up what we've already earned. But, if you happened to buy PTTRX 4 years ago and "the bond bubble" started this week, you would have an easier decision and a bit of "wiggle room" about selling the fund; versus if you bought the fund the week before. You may also be dollar cost averaging via a retirement plan for many years into a PTTRX; so your cost during the growth of this fund has smoothed your investment. Worse case with any investment area/fund is to sell down in 25% chunks, if you are no longer happy with the fund or market conditions.
    You noted a 20 year (long term) time frame prior to retirement, and assuming a traditional retirement age of 65. If you so desire, you have a 40 year long term horizon with your investments; assuming a 20 year post-retirement period. Although I am likely 20 years in front of you, our house hopefully, will continue to be long term investors, too; if I/we are able to average the longevity tables. Your advantage is that you should be able to continue to have cash flow into your house with employment, while we won't have this position and eventually will have cash flowing the other direction from our retirement accounts. Although employment provides for an ease of mind concerning investments, an investor of any age has to be mindful of preservation of investment capital in order to benefit from the greatest advantage an investor has; and this is the continued compounding of monies going forward, building upon what has been "retained" for compounding versus "I can make up a large investment loss with cash from employement". Yes, these are easy words to write; but less easy to deal with the reality.
    At this point in time, I would not be concerned about a 10% portfolio holding in a broad based bond fund causing any damage to your overall portfolio return from a possible, future bond bubble; and such a fund will provide a cushion against your equity portfolio. You may also hold more bonds than you are aware of via equity funds positioned in these areas, too.
    You may be assured that this house is watching for a "bond bubble" with this portfolio:
    ---High Yield/High Income Bond funds
    FAGIX Fid Capital & Income
    SPHIX Fid High Income
    FHIIX.LW Fed High Income
    DIHYX TransAmerica HY
    ---Total Bond funds
    FTBFX Fid Total
    PTTRX Pimco Total
    ---Investment Grade Bonds
    ACITX Amer. Cent. TIPS Bond
    DGCIX Delaware Corp. Bd
    FBNDX Fid Invest Grade
    FINPX Fidelity TIPS Bond
    OPBYX Oppenheimer Core Bond
    ---Global/Diversified Bonds
    FSICX Fid Strategic Income
    FNMIX Fid New Markets
    DPFFX Delaware Diversified
    LSBDX Loomis Sayles
    PONDX Pimco Income fund (steroid version)
    PLDDX Pimco Low Duration (domestic/foreign)
    All of these funds were positve on Dec. 10, Monday; with the exception of DPFFX, FBNDX and PLDDX, which were all "flat" for the day. The average gain was +.14%, ranging from .01% through .39%.
    Are our bond funds expensive today? Well, surely more so versus 1,2 or 3 years ago. Would we buy any bond funds today? We (our house) will have to wait until 2013 to review this whole area. One always has to ask the question, regardless of investment sector involved. I have to ask the question today, as I look at one corporate bond fund, FBNDX with a current 30 day SEC yield of about 1.6% and compare this to an equity/dividend fund at Fidelity with a yield of 2.5%. Hmmm, perhaps it is time to rotate the bond fund; as if pricing does not continue upward from this point, I may expect only the 1.6% yield. Nope that ain't gonna work, eh? These are the questions in place at this house, but will have to be on hold until the new year to find what, if many investment sectors, may receive a face slap, pending actions in Washington and our being away from trading capabilities the last week of this year. Argh !!!
    Prior to June, 2008; our house was also 90% equity. We will not likely find that positioning again, as we move into retirement; but do need to "find" the right mix going forward.
    Any and all of these decisions come in a time of "an artifical and perverted" world of monetary involvement from central banks and global economies in flux worrying and concerned about growth and deflation, with the resulting investing circumstances perhaps being this house's "once in a lifetime" investing road course.
    Lastly, your greatest investment asset; being you, is that you are thinking and considering the aspects of your house's investments. In my opinion, you are involved in, and part of an excellent community (MFO) from where you will obtain a wide range of opinons and thoughts from a vast group of thinkers, across a wide spectrum of topics, to help one another detail and rethink our investment portfolios, based in part; of where any of our house's are positioned related to one's investment risk and reward psychology. Heck, one may also obtain excellent guidance about the best wi-fi router for home use. A most excellent community, is this place.
    Don't become discouraged about the one's (investments) that got away, or the should've, would've, could've investments that may have been missed. Also do not forget to pat yourself upon your back for investment work well done; as many others will not be aware of the amount of effort put forth to properly grow your hard earned monies.
    Okay, I have blabbered enough to fill and fly a hot air ballon; and my chores list is staring at me, too.
    Take care,
    Catch
  • Bond Fund Performance During Periods of Rising Interest Rates
    Here are some questions from a long-term investor's standpoint:
    If one is a long-term investor (20+ years until retirement) and if one truely believes that this bond bubble will bust within 5 years.... would it not be best to pull my 10% allocation to bond funds 100% out of the market, and wait it out in equities (or cash), with the plan to re-enter my 10% bond fund position (or by then, more than 10%) after that bust occurs?
    If the magnitude of this bubble popping wipes out several years of bond investments... from the perspective of long-term investor, it seems hard to find an argument to stay invested in bonds now.
    I'd love to hear any contrary opinions from folks who are in the camp of believing this bubble is going to burst. For that matter, I'd love to hear any predictions on what folks think the potential hit could be on a core bond fund (e.g. PTTRX), and how long it would take for a fund like that to recover from a burst, considering the mid/long-term macro economic climate of slow/no growth.
  • TRP IRA Closeout Fee
    This caught me by surprise, it's not in the prospectus but in the custodial agreement. Not sure how I missed it, I've always moved within TRP and had the account for years. Not sure if everyone is aware of it.
    Closeout Fee—a $20 fee is deducted from each IRA or ESA mutual fund account that is fully redeemed, transferred to a non-IRA or ESA, or transferred out of T. Rowe Price. The closeout fee also is deducted from SEP-IRA, Money Purchase Pension, Profit Sharing Plan, 403(b), and Individual 401(k) accounts that are closed without being transferred or rolled over to another T. Rowe Price retirement plan account. The fee is not charged to any accounts that have already been assessed the account service fee for that calendar year
  • 3 Reasons Your Portfolio Needs More Exposure To Emerging Markets
    Reply to @MaxBialystock:
    Hi Max,
    The Oppenheimer Developing Markets fund is attractive despite its bloated $28B in AUM. I would try and buy the lowest cost class, ODVIX (net ER 0.89%), which appears to be available for a $1K minimum in both taxable and retirement accounts at Scottrade according to a test trade I just made. ODVYX (net ER 1.00) appears to be available for a $50 minimum in Wellstrade retirement accounts, again according to a test trade. Just be aware that actual trades may not go through at these amounts.
    I continue to favor EEMV (net ER 0.25%) in the LC/MC EM space, but I also like and follow ABEMX/AEMSX, HIEMX, and MNEMX. HERE is a scalable chart of these funds.
    Kevin
  • Bond Fund Performance During Periods of Rising Interest Rates

    Current trend on MFO is discussion of negative impact to bond-heavy income and retirement portfolios, if and when rates rise.
    In David's inaugural column on Amazon money and markets "Trees Do Not Grow To The Sky", he calls attention to: "If interest rates and inflation move quickly up, the market value of the bonds that you (or your bond fund manager) hold can drop like a rock." And there have been several recent related posts about an impending "Bond Bubble."
    Here's look back at average intermediate term bond fund performance during the past 50 years:
    image
    Background uses same 10-year Treasury yield data that David highlights in his guest column. Also plotted is the downside return relative to cash or money-market, since while these funds have held up fairly well on absolute terms, on relative terms the potential for under-performance is quite clear.
    More dramatic downside performance can be seen the higher yield (generally quality less than BB) bond funds, where relative and even absolute losses can be 25%:
    image
    Taking a closer look, the chart below compares performance of intermediate, high-yield, and equities when interest rates rise (note year, 10-year Treasury yield, and rate increase from previous year):
    image
    I included for comparison 2008 performance. Here declines were not driven by increasing rates, but by the financial crisis, of course. Presumably, such strong relative performance for intermediate bonds in 2008 is what has driven the recent flight to bonds. That said, several previous periods of increasing rates happened during bear markets, like 1974, making alternatives to bonds tough to find.
    Over the (very) long run, equities out-perform bonds and cash, as is evident below, but may not be practical alternative to bonds for many investors, because of investment horizon, risk-tolerance, dependence on yield, or all the above.
    image
    What's so interesting about this look-back are the distinct periods of "ideal" investments, by which I mean an investment vehicle that both outperformed alternatives and did not incur a sharp decline, as summarized in table below:
    image
    In the three years from 1963-65, stocks were the choice. But in the 19 years from 1966-84, cash was king. Followed by the extraordinary 15-year bull run for stocks. Ending with the current period, if you will, where bonds have been king: first, intermediate term bonds from 2000-08, but most recently, alluring high yield bonds since 2009.
    Despite its flat-line performance since 2009, cash is often mentioned as a viable alternative (eg, Scout Unconstrained Bond Fund SUBFX and Crescent Fund FPACX are now cash heavy). But until I saw its strong and long-lived performance from 1966-84, I had not seriously considered. Certainly, it has offered healthy growth, if not yield, during periods of rising interest rates.

  • Our Funds Boat, Week + .49%, YTD + 12.71% "+.031872510 %" Dec 8, 2012
    Howdy,
    A thank you to all who post the links, start and participate in the many fine commentaries woven into the message threads.
    For those who don't know; I ramble away about this and that, at least once each week. The perspectives and investments are based, not upon a formal economic studies background; but from the "School of Hard Knocks & Studies". Of which, this house is still enrolled.
    NOTE: This portfolio is designed for retirement, capital preservation and to stay ahead of inflation creep. This is not a buy and hold portfolio, and is subject to change on any given day; based upon perceptions of market directions. All assets in this portfolio are in tax-sheltered accounts; and any fund distributions are reinvested in the funds. Gains or losses are computed from actual account values.
    While looking around.....An old children's holiday song lyric goes....."All I want for Christmas is my two front teeth, my two front teeth, my two front teeth....." Perhaps all an investor could want for each and every Christmas, is an average annual return of +8%. The math is simple, but the chore is less so, eh? Going for a net of +2.7% annually could look this way, in the most simple math terms.
    --- +8% gross investment return
    --- let us throw out 2% of this assuming a fed. taxable bracket of 25% (more for high tax states)
    --- we're now at +6%
    --- a further reduction of 3.3% for the old inflation hidden tax thingy (3.3 perhaps being a high end average)
    --- = a net of +2.7%
    Can one live with this return? All answers will be different. One needs to generate a +.031872510% return for each of the average 251 trading days/year to arrive at a 8% return. Well, just a little fun looking at investments from the simple side of life. This house's schedule is already loaded to the maximum through the new year period; and so this report may not be posted in any fullness for the next several weeks. And horror of horrors; we will be traveling upon the highways on the Mayan flip day of December, 21, 2012. We will be "stuck" with our portfolio; regardless of events, as the last week of the year will find us without access to a secure online connection, if any connection at all.
    NOTE: for the below sector rotations. Some of the variances in % terms may be beyond normal values, as some numbers will be adjusted for distributions at this time of the year, and reflected in week ending numbers.
    The data/numbers below have been updated.
    As to sector rotations below (Fidelity funds); for the past week: (Note: any given fund in any of these sectors will have varying degrees of performance based upon where the manager(s) choose to be invested and will not directly reflect upon your particular fund holdings from other vendors.) Sidenote: The average weekly return of 200 combined Fidelity retail funds across all sectors (week avg = - .07%, YTD +12.65%).
    --- U.S. equity - 5.36% through + 1.6%, week avg. = - .41% YTD = + 15.05%
    --- Int'l equity - 7.21% through + 2.0%, week avg. = - .95% YTD = + 15.61%
    --- Select eq. sectors - 3.8% through + 1.4%, week avg. = - .04% YTD = + 15.0%
    --- U.S./Int'l bonds - .15% through + .51%, week avg. = + .09% YTD = + 4.2%
    --- HY bonds - .20% through + .74%, week avg. = + .33% YTD = + 12.92%
    A Decent Overview, M* 1 Month through 5 Year, Multiple Indexes
    You may consider our portfolio to be quite boring, but you may be assured that it moves and bends each and every day; from forces beyond our control.
    I have added a few blips related to our portfolio and market observations at the below SELLs/BUYs and Portfolio Thoughts.
    SELLs/BUYs THIS PAST WEEK: = NONE.

    Portfolio Thoughts:
    Our holdings had a + .49 % move this past week. As to the bond world. High yield active funds generally were ahead of their ETF cousins, with our holdings mix ranging from +.81% through +1.1% for the week. Our lowest return weekly performer was PLDDX at +.13% for the week. Other holdings: LSBDX at +.66%, PONDX at +.75% and FNMIX at +.51%. The well performing cousin of PTTRX (+.22%) performed a bit less with BOND at +.14% for the week. Many bond sectors were strong performers through Thursday, while retreating on Friday. Even the unloved and lowly respected TIPs related funds of ACITX and FINPX are working hard to return 8% for the year. Not too bad for funds with negative yields, eh? 'Course the yield and pricing is reflected from the current demand. Not bond benchmarks; but broad U.S. equity measures were at, for the week: SP-500 at +.13%, VTI at +.22% while the NASDAQ and related fund sectors were down about 1% from the "Apple" affect and its losses for the week. Some U.S. equity funds hold fairly large positions in Apple stock. One such fund, FCNTX recently held a 13% position. The Latin American sector could be a fund area to watch, going forward, as this area has been weak YTD. There continues to be a wide range of weekly returns between select equity(s) sectors and particular global country sectors. A lot of hot money is still traveling and looking for the best "play". We'll continue to watch; but do not have plans at this time, to enter into equity areas.
    Still plodding along, and we will retain the below write from previous weeks; as what we are watching, still applies.

    --- commodity pricing, especially the energy and base materials areas; copper and related.
    --- the $US broad basket value, and in particular against the Euro and Aussie dollar (EU zone and China/Asia uncertainties).
    --- price directions of U.S. treasury's, German bunds, U.K. gilts, Japanese bonds; and continued monitoring of Spanish/Italian bond pricing/yield.
    --- what we are watching to help understand the money flows: SHY, IEF, TLT, TIPZ, STPZ, LTPZ, LQD, EMB, HYG, IWM, IYT & VWO; all of which offer insights reflected from the big traders as to the quality/risk, or lack of quality/risk; in various equity/bond sectors.
    The Funds Boat is at anchor, riding in the small waves, watching the weather and behind the breakwater barrier. To the high praise of MFO and the members, it is very difficult to find a topic to note here that has not been placed into the discussion boards. Excellence, as usual.
    I have retained the following links for those who may choose to do their own holdings comparison against the fund types noted.
    The first two links to Bloomberg are for their list of balanced/flexible funds; although I don't always agree with the placement of fund styles in their categories.
    Bloomberg Balanced
    Bloomberg Flexible
    These next two links are for conservative and moderate fund leaders YTD, per MSN.
    Conservative Allocation
    Moderate Allocation
    A reflection upon the links above. We attempt to establish a "benchmark" for our portfolio to help us "see" how our funds are performing. Aside from viewing many funds within the balanced/flexible funds rankings (the above links), a quick and dirty group of 5 funds (below) we watch for psuedo benchmarking are the following:
    ***Note: these week/YTD's per M*
    VWINX .... + .41% week, YTD = + 9.85%
    PRPFX .... - .24% week, YTD = + 6.7%
    SIRRX ..... + .42% week, YTD = + 7.02%
    TRRFX .... + .49% week, YTD = + 10.2%
    VTENX ... + .57% week, YTD = + 9.36%

    Such are the numerous battles with investments attempting to capture a decent return and minimize the risk.
    We live and invest in interesting times, eh? Hey, I probably forgot something; and hopefully the words make some sense. Comments and questions always welcomed.
    Good fortune to you, yours and the investments.
    Take care,
    Catch
    ---Below is what M* x-ray has attempted to sort for our portfolio, as of Nov. 1, 2012 ---
    From what I find, M* has a difficult time sorting out the holdings with bond funds.
    U.S./Foreign Stocks 1.9%
    Bonds 93.9% ***
    Other 4.2%
    Not Classified 0.00%
    Avg yield = 3.99%
    Avg expense = .57%
    ***about 18% of the bond total are high yield category (equity related cousins)

    ---This % listing is kinda generic, by fund "name"; which doesn't always imply the holdings, eh?
    -Investment grade bond funds 28.2%
    -Diversified bond funds 22.4%
    -HY/HI bond funds 14.5%
    -Total bond funds 32.4%
    -Foreign EM/debt bond funds .6%
    -U.S./Int'l equity/speciality funds 1.9%
    This is our current list: (NOTE: I have added a speciality grouping below for a few of fund types)
    ---High Yield/High Income Bond funds
    FAGIX Fid Capital & Income
    SPHIX Fid High Income
    FHIIX.LW Fed High Income
    DIHYX TransAmerica HY
    ---Total Bond funds
    FTBFX Fid Total
    PTTRX Pimco Total
    ---Investment Grade Bonds
    ACITX Amer. Cent. TIPS Bond
    DGCIX Delaware Corp. Bd
    FBNDX Fid Invest Grade
    FINPX Fidelity TIPS Bond
    OPBYX Oppenheimer Core Bond
    ---Global/Diversified Bonds
    FSICX Fid Strategic Income
    FNMIX Fid New Markets
    DPFFX Delaware Diversified
    LSBDX Loomis Sayles
    PONDX Pimco Income fund (steroid version)
    PLDDX Pimco Low Duration (domestic/foreign)
    ---Speciality Funds (sectors or mixed allocation)
    FRIFX Fidelity Real Estate Income (bond/equity mix)
    ---Equity-Domestic/Foreign
    NONE outright, with the exception of equities held inside some of the above funds.
  • Wifey's (new) Retirement Plan
    Max,
    You noted:
    -Vesting method: 3 year cliff.
    -Employer contribution: ZERO for years 1 and 2. After that, 100%. (Again, 100% of... WHAT?!)
    This area would have to be defined directly from the HR dept. at the hospital. All organizations have their own policy structures regarding matching.
    As to the concept regarding a "match"; the below, which is a copy/paste of another's text may offer some insight.
    "Some employers will make matching contributions to a 403(b), especially if it is their only retirement planning option. For example a 5% match means that the employer will match contributions up to 5% of the employees annual salary. In other words, if someone earns $50,000, and contributes $4000 to his/her 401(k), the employer will contribute a maximum of $2500 (5% of salary). In some cases, the match is not dollar-for-dollar and employers may only match 50%, or 25% of the employee's own contribution."
    Hopefully, some examples will be provided regarding BayState's policy.
    Take care,
    Catch