Asset Allocation | Holdings Detail Morningstar
Tampabay
Long% Short% Net%
Cash 3 0 3
U.S. Stocks 77 0 77
Foreign Stocks 5 0 5
Bonds 14 0 14
Other 1 0 1
Not Classified 0 0 0
Total 100 0 100
For What its Worth: 77% U.S. stocks 3% cash 0% short, Ready for 4th Quarter run up? Really.....

With the lull before earning season and mid term elections, I am wondering what investors on the board might be thinking, positioning, and or doing?
For me I have been mostly looking as the recent dip did not go deep enough to peak my buying interest in equities. In checking one of my reference sites I find that the S&P 500 Index is trading on a TTM P/E Ratio of 19.3 and on Forward Estimates at 16.8 while its year-to-date gain has been about 8.7%. With this I am wondering how much is still left in the ride until we reach year end? Yes, indeed a lot of uncertainties exist. I am still thinking October might bring a buying opportunity with a dip or pull back coming. After all, we have mid-term elections coming the first part of November before we get to the traditional fall rally phase part of the year starting somewhere between Halloween to Thanksgiving and carrying on past Christmas to the first part of the New Year.
My target asset allocations are 15% cash, 35% income, 40% equity and 10% other. Currently, I am cash heavy at 20%, income light at 25%, equity heavy at 45% and neutral in other assets at 10% as shown by Morningstar’s x-ray. I’d like to move 5% of my cash to equities for the anticipated traditional fall stock market rally but wish to position in during a good dip or pull back in the stock market. Should we get to the rally without the anticipated dip then I’ll just most likely let things ride as they are and forgo a rebalance after the 1st quarter. Heck, I always enjoyed my fall rally “spiff” investment move as it was a way I generated a little extra cash. My spiff investments set ups have been hard to come by of late.
I’ll close with I am currently just looking while I ponder.
So ... What might you be thinking?
Old_Skeet

Thanks Old_Skeet. Your explanation is clearer than Teds.

John, I didn't open any of the links, but this year I've read several articles about "smart beta" or "strategic beta". What I've learned from those articles is basically that any 'index' weighting that is not capitalization weighted like the S&P 500 and like most traditional indexes, is "smart beta", if it was done that way to try and enhance returns based on back testing.
A prime example are the RAFI Fundamental Indexes from the Rob Arnott group, where they weight the index constituents by several fundamental factors such as free cash flow, dividends, sales, etc. They want to get away from cap weighting.
Another example are the dividend weighted indexes found in many of the Wisdom Tree ETFs.
Other examples could be earnings weighted. Anything to get the market price factor out of the equation.
Another example is equal weighted. Guggenheim has an equal weighted S&P 500 ETF, so I guess each stock is weighted 0.2%
Some "smart beta" ETFs tilt to value and small cap.
Some address volatility. Some address momentum.
A better term than "smart" beta would be "Factor Investing".....it's essentially coming up with a rules based method of weighting each stock in the index, and in many cases, a rules based method of selecting the stocks in the index.

Mona, love you, but you know my portfoilio by heart by know, but I'm going to give MJG MY Stock Sector| Holdings Detail Vs. the S&P (per Morningstar)
Portfolio Tampabay
(% of Stocks sector) vs S&P 500 (%)
Tampabay S&P
Cyclical 18.30 30.51
Basic Materials 0.98 3.36
Consumer Cyclical 9.47 10.42
Financial Services 7.81 14.76
Real Estate 0.04 1.97
Sensitive 23.83 43.02
Communication Services 11.52 3.98
Energy 2.66 10.39
Industrials 3.36 10.94
Technology 6.29 17.72
Defensive 57.87 26.47
Consumer Defensive 29.10 9.37
Healthcare 27.73 14.09
Utilities 1.04 3.01
No diversification there Baby ,"a diverse array" not really....tb

@mrdarcey, question for you. This is off topic, because it does not apply to Vanguard ETFs vs. Vanguard Traditional Index Funds. Vanguard has a patented, unique structure so that their ETFs are simply a different share class of the identical traditional index fund.
But for non-Vanguard ETFs vs. index funds, the financial press used to be very big on saying that ETFs would have lower taxable distributions than even traditional index funds in the event that a lot of shareholders sold, say in a bear market.
The press would always say that traditional index funds were very tax efficient, but in the event of a lot of selling, say in a bear market, the previously unrealized capital gains would become realized capital gains and affect all shareholders to some extent. Realized capital gains would be distributed to all shareholders of the traditional index funds, including those that did not sell.
But this would not take place in an ETF, because shareholder selling in a bear market would not cause unrealized capital gains to become realized for those in the ETF that did not sell.
I haven't heard this talked about much lately, but it used to be very common.
It's similar to an actively managed fund. If the managers sell a lot of individual stock at a gain [assuming it's not balanced out by other losses], those capital gains get distributed to all shareholders, who have to pay capital gains taxes on them, even though they didn't sell any shares of their mutual fund.
So if you have an S&P 500 traditional index fund, a bad bear market comes and tons of shareholders sell. The "managers" have to sell stocks to generate redemption proceeds. Supposedly that will cause a capital gains distribution to hit even those shareholders that didn't sell.

Hi Tampabay,
Thank you for reading my posts. I’m pleased that you are so happy with your current portfolio positions.
I too am very much dedicated to portfolio cost control. Together, we’re in Bogle’s camp in that regard; costs not only matter, they matter greatly. Congratulations on the excellent job you report for your personal portfolio’s low expenses. I have not been that industrious.
Various sources report that the average expense ratio for mutual funds range between 1.1% and 1.5% annually, without specifying how that average was calculated. I did not expect the range of that number. Like you, I like to reference the most reliable values I can access. So I went to ICI’s “2014 Investment Company Fact Book”.
From that reference, Figure 5.6 presents the “Expense Ratios of Actively Managed and Index Funds” from 2000 to 2013. The costs, which are asset-weighted average values, have been declining over that time period. Most recently, the average actively managed equity fund costs 89 basis points. Index equity funds cost 12 basis points. That 77 basis point differential is the hurdle that active management must overcome. A huge number of these funds trip over that hurdle.
I really try to only reference studies that have survived peer review. Therefore, I tend to emphasize academic studies and carefully selected industry work. For example, the cited Rick Ferri Whitepaper was the “Winner of the S&P Dow Jones Indices Third Annual SPIVA Award". It is an impressive Monte Carlo-based analysis. My opinion is that more work needs to be done using that tool.
Given the rather large number of low Expense Ratios that you cited (presumably not your complete portfolio), I was surprised by the comparison of your portfolio performance against the Total Stock Market Index. I would suspect that your portfolio is more nuanced, more complex than a single benchmark standard. Given that you are an informed and experienced investor, I anticipate that your holdings would benefit from a diverse array of investment categories: a ladder of bonds, international and emerging market holdings, small Cap value funds, some real estate positions, perhaps commodity and gold products.
If in fact your portfolio reflects fully broad diversification, then choosing to compare outcomes against a single market equity Index is an imprecise and loose standard. My portfolio is broadly diversified, so I deploy a mix of benchmark Indices that more closely resemble my actual portfolio allocations.
By the way, at the present time, the equity portion of my portfolio is divided about evenly between actively managed and Index holdings.
Again I was surprised by your quoting of portfolio performance year-to-date. I’m pleased that you are satisfied with its current superior output, but that is a meaningless comparison when discussing long-term investment philosophy and guidelines. Even the best hitter in baseball can go 0 hits for 5 at-bats today while a poor hitter can register 2 hits for 5 at-bats. Longer term performance records need to be examined.
Random short term outcomes are not truly indicative of skilful active fund management. I hope your actively managed funds continue to deliver superior results over a statistically meaningful time horizon that is compatible with your goals. Beware of a reversion-to-the-mean market pull. That happens frequently with active fund management. Index funds avoid that risk factor. Seeking positive Alpha introduces the risk of market underperformance.
You get to choose. I have never made any fund recommendation on MFO.
Active fund management is needed for market price discovery. I’ll close with the comment that opened my contributions to this discussion: I believe that “Active mutual fund management is certainly not dead, and will never die.” Wow, I’m quoting myself!
Best Wishes.

Heres what I pay some of the BEST managers & Some ETFs in the Business:
0.10%,0.14%0.14%, 0.15%,0.17%,0.18%,0.23%,0.25%,0.26%,0.35% 0.38%,0,50%,0.71%,0.74%
my average cost per fund/ETF 0.37% Far from 1%
My net (after cost) return ytd +10.56%
Total stock makt.index+9.24
and I wouldn't trade my managers for any INDEX you hold, so keep reading your "real world Data" about costs.....

Just curious. You can certainly get active Vanguard products in the .25 bp range, but the other relatively cheap active families I know (D&C, Mairs and Power, Primecap, T. Rowe) are all in the .5-.75 bp range.
The really low ones there are ETFs, I assume? And if so, aren't they indices?

If interest rates rise generally REITS lose value. One way to minimize that is to invest in foreign REITS.
http://seekingalpha.com/currents/post/1982845?source=iphoneportfolioapp_copy

MGL:Here Mister Monte Carlo," I read it so it must be true"
Heres what I pay some of the BEST managers & Some ETFs in the Business:
0.10%,0.14%0.14%, 0.15%,0.17%,0.18%,0.23%,0.25%,0.26%,0.35% 0.38%,0,50%,0.71%,0.74%
my average cost per fund/ETF 0.37% Far from 1%
My net (after cost) return ytd +10.56%
Total stock makt.index+9.24
and I wouldn't trade my managers for any INDEX you hold, so keep reading your "real world Data" about costs.....

This article from Barrons provide some insight into issues with HYMB
http://online.barrons.com/news/articles/SB50001424053111904780504580049990149821472

In the mini selloff in junk munis in early July, HYD sold off over 4% early that month (closing highs to intraday lows) while HYMB sold of over 3%. Yet the open end barely sold off over 1% while EIHYX didn't even sell off 3/4 of a %.

HYD has 646 bonds in the fund, so it must have been the general asset class itself that sold off, no? Maybe the pertinent question is, how did EIHYX manage to not sell off like HYD? Was it the active management and bond selection? HYMB has 325 bonds, again implying that it was the asset class that sold off, and somehow EIHYX was protected.
I don't see any leverage in these etfs. They are not closed end funds.

Hi Tampabay,
Sorry to learn that your situation is such that you have severely constrained options relative to active/passive fund decision-making and changes.
Unless you are an especially adroit mutual fund manager screener, the price that you are likely to pay for assembling an actively managed fund portfolio rather than an Index dominated portfolio hovers around 1% annually.
The 1% penalty is not a random number that I invented. It is a general average that I gleaned from the Monte Carlo studies reported recently by Rick Ferri. I have referenced this body of work earlier, but it is worthwhile to revisit it now. The title of the report is “The Case for Index Fund Portfolios”. Here is a Link to it:
http://www.rickferri.com/WhitePaper.pdf
The Ferri Whitepaper is based upon a series of Monte Carlo-based simulations that used real world fund data for various recent timeframes. Each Monte Carlo separate case used 5,000 random fund selections to construct a portfolio. Actively managed fund portfolio performance was measured against equivalent passively managed Index products.
The Monte Carlo analyses were completed for 3-fund, 5-fund, and 10-fund portfolios. Different timeframe data were also explored.
The actual numbers changed for each simulation, and are nicely summarized in the referenced paper. Especially meaningful performance summarizes can be found in Figure 1 and in Table 6. You should check these out. Specific numbers change as the number of funds dimension and the timeframe dimension changes.
In these various cases, Index portfolios outdistanced actively managed portfolios in 82% to 90% on the instances. In those cases when the active funds outperformed the Index portfolios, the excess positive returns where one-third to one-half the negative excess returns in the failed instances.
As a very general summary, a portfolio constructed with actively managed funds will deliver approximately 1% less return than its Index equivalent. That’s the sad news.
The good news is that the active managers do recover some of their operating costs with perhaps a mix of superior stock selection and/or effective market timing of entry/exit points. Although persistent performance is an issue, a small cohort of active managers do deliver positive excess returns (Alpha) over complete market cycles. That’s the real acid test.
I wish you success in identifying this small cohort. Low cost is one indicator even endorsed by Vanguard. Michael Mauboussin has also stated that fund managers seem to generate peak outcomes in their early 40s. Perhaps an age criteria, like centered on 43 years old, would aid the search process.
Good Luck and Best Wishes.

Robert, it's their volatility as well as having to deal with bid/ask spreads which can be wide in something as thinly traded as HYMB. In the mini selloff in junk munis in early July, HYD sold off over 4% early that month (closing highs to intraday lows) while HYMB sold of over 3%. Yet the open end barely sold off over 1% while EIHYX didn't even sell off 3/4 of a %. Not including today, HYD is up only 12.20 YTD while the big three in the open end are up between 14.22% to 15.01%. HYMB is up 13.74% but again, wide spreads on a thinly traded product.

@rjb112: "The Fed just revealed yesterday that the Fed Funds rate, currently 0% to 0.25%, is expected by the Fed to be at 3.75% at the end of 2017. If the corresponding rates of the bonds that the DoubleLine Long Duration Bond Fund will invest in also increase 3.75%, the NAV of the fund would be expected to drop close to 37.5%."
why do you think that the overnight fed rate has anything to do with the long term interest rates?

There has to be at least some connection. That doesn't mean that the 10-yr or 30-yr has to go up by 3.75%, but there has to be a connection.
Current Fed Fund rate: 0% to .25%
Expected Fed Funds rate end of 2017: 3.75%
If there was no connection at all, then by the end of 2017 we would have an inverted yield curve, with the overnight rate higher than the 30-yr and 10-year rates.
If there was no connection, we wouldn't have all this talk about bond fund Duration, and the typical statements about "if rates go up 1%, the NAV will go down by the amount of the Duration", etc. Yeah, they could do a much better job specifying exactly which rates they are talking about, but the implication is that as the Fed raises rates, so generally will rates rise.....
I would like to read a "Whitepaper" or good article on the relationship between the Fed Funds rate and the 10-year and 30-year Treasury yield.
Do you know of any articles on the subject?

VTSMX 5yr. avg returns= 16%, 10 year avg. = 8.66%
MY question is How does you portfolio(MUTUAL FUNDS) compare? NOW IS GONE TOMORROW...

http://www.sec.gov/Archives/edgar/data/1309187/000089418914004577/wyfunds_497e.htm
THE CORE FUND
a series of WY Funds
Class I shares: SGBFX Class Y shares: SGBYX
Supplement dated September 19, 2014 (effective at the close of business) to the Prospectus dated May 1, 2014
The Board of Trustees of The Core Fund (the “Fund”), a separate series of the WY Funds, has concluded that it is in the best interests of the Fund and its shareholders that the Fund cease operations. On August 25, 2014 the Board authorized the liquidation of the Fund and redemption of all outstanding shares on September 30, 2014, 2014.
Effective September 19, 2014, the Fund will not accept any new investments and will no longer pursue its stated investment objective. The Fund will begin liquidating its portfolio and will invest in cash equivalents such as money market funds until all shares have been redeemed. Shares of the Fund are not available for purchase.
Prior to September 30, 2014, you may redeem your shares in accordance with the “How to Redeem Shares” section in the Prospectus. The Board of Trustees has adopted procedures that permit in-kind redemptions (permit you to receive proceeds of a redemption in securities instead of cash) Please contact the transfer agent at 1-866-329-2673 to request an in-kind redemption. The Fund may, at its discretion, redeem your shares by giving you the amount that exceeds the lesser of $250,000 or 1% of the Fund’s net asset value in securities instead of cash. In-kind redemptions, will be processed through your broker or other financial intermediary. Unless your investment in the Fund is through a tax-deferred retirement account, a redemption is subject to tax on any taxable gains. Please refer to the “Tax Status, Dividends and Distributions” section in the Prospectus for general information. You may wish to consult your tax advisor about your particular situation.
ANY SHAREHOLDERS WHO HAVE NOT REDEEMED THEIR SHARES OF THE FUND PRIOR TO SEPTEMBER 30, 2014 WILL HAVE THEIR SHARES AUTOMATICALLY REDEEMED AS OF THAT DATE. CASH REDEMPTION PROCEEDS WILL BE SENT TO THE ADDRESS OF RECORD. IF YOU HAVE QUESTIONS OR NEED ASSISTANCE, PLEASE CONTACT YOUR FINANCIAL ADVISOR DIRECTLY OR THE FUND AT 1-866-329-CORE (2673).
IMPORTANT INFORMATION FOR RETIREMENT PLAN INVESTORS
If you are a retirement plan investor, you should consult your tax advisor regarding the consequences of a redemption of Fund shares. If you receive a distribution from an Individual Retirement Account or a Simplified Employee Pension (SEP) IRA, you must roll the proceeds into another Individual Retirement Account within sixty (60) days of the date of the distribution in order to avoid having to include the distribution in your taxable income for the year. If you receive a distribution from a 403(b)(7) Custodian Account (Tax-Sheltered account) or a Keogh Account, you must roll the distribution into a similar type of retirement plan within sixty (60) days in order to avoid disqualification of your plan and the severe tax consequences that it can bring. If you are the trustee of a Qualified Retirement Plan, you may reinvest the money in any way permitted by the plan and trust agreement.
This Supplement and the existing Prospectus and Statement of Additional Information dated May 1, 2014, provide relevant information for all shareholders and should be retained for future reference. Both the Prospectus and the Statement of Additional Information dated May 1, 2014, have been filed with the Securities and Exchange Commission, are incorporated by reference and can be obtained without charge by calling the Fund at 1-866-329-CORE (2673).

Hi Guys,
Active mutual fund management is certainly not dead, and will never die.
Why? Active managers are experiencing some tough years, investors are abandoning them in droves, and academic/industry research paints a dismal picture. The simple answer is human hubris. Nobody readily accepts average performance; almost all of us reside in Lake Wobegon. Or at least we want to believe that’s true.
Outcomes are the sum of skill and luck components. That’s not my model. Michael Mauboussin advocates this model and writes extensively about it. He uses numerous sports analyses to illustrate his findings. His overarching conclusion is that overall skill levels are increasing to a point where performance differences are small. That means that outcomes are more dependent upon luck factors since skill neutralizes itself.
Mauboussin uses ballplayer and superstar Ted Williams as a prime example. Williams was the last player to hit 400 for an entire season. He believes that record will stand forever because the skill normal distribution has become very spike-like in character; its standard deviation has decreased substantially over the past decades.
Whereas, in Williams’ playing days a plus 4-sigma performance was needed to reach a 400 batting average level, with today’s crunched higher skills, an unlikely 6-sigma performance is required to achieve that lofty 400 hitting zone.
Similarly, the professional investors today would likely outperform those from yesteryear. Now professionals are better trained, better informed, have huge staffs, and super computers. All professionals benefit from these pluses about equally, and any resultant perceived advantage tends to cancel each other out.
Seeking Alpha is a more challenging task given the competency of the players. It’s a tough game, but animal spirits keep many players in it. “Average” is just not the American way. Note that today 70% of the trading is done by professionals. Where does that place us individual investors within the skill-luck spectrum tradeoff in a relative sense? We know more, but so do these pros.
I mention Mauboussin because he has written many books that touch on this subject. His “The Success Equation” is devoted to this topic. I have not read it. But I have read a lengthy report that Mauboussin composed that formed the basis for his book. The title of the article is “Untangling Skill and Luck”. Here is a Link to that work:
http://vserver1.cscs.lsa.umich.edu/~spage/ONLINECOURSE/R15SkillandLuck.pdf
It’s a very nicely written report. It contains many investment lessons that could benefit you guys. I recommend you download and absorb it.
Best Regards.

Well, as usual, I just shot my mouth off without worrying too much about the actual numbers, so when I looked into it, I was happy to see that I was correct.
Quality means different things to different people of course. To me, the paramount data point would be earnings predictability. The etf QUAL uses 3 factors: high return on equity, low debt to equity, and low earnings variability. Its YTD return is 7.98%. Vanguard Dividend Appreciation VIG uses a rising dividend stream as a proxy for "quality". Its YTD return is 5.76%.
Both of these etfs falls short of the total index etf (VTI) which is currently up 9.54%

@rjb112: "The Fed just revealed yesterday that the Fed Funds rate, currently 0% to 0.25%, is expected by the Fed to be at 3.75% at the end of 2017. If the corresponding rates of the bonds that the DoubleLine Long Duration Bond Fund will invest in also increase 3.75%, the NAV of the fund would be expected to drop close to 37.5%."
why do you think that the overnight fed rate has anything to do with the long term interest rates?
in terms of timing of the launch, it is curious. however, if he thinks that the long rates are to go up in the short term due to the improving economy and exit of the large buyer (the fed), and then will stabilize for many years at around 4.5%, then he might get a good entry point during the next 6-8 months as the fed purchases subside and the first overnight rate hikes get implemented. also, the rising equity markets caused many previously underfunded pension schemes to get close to the fully funded status. most of them went to their respective boards and investment committees to ask for the 'de-risking' mandate. as more of them get this approved, there will be a huge demand for the long-term treasuries and IG corporates. so, may be, just may be, he has a vision and perspective that some on the retail side simply lack?

Another viewpoint on the active versus passive argument.
http://m.barrons.com/articles/BL-FUNDSB-16551?ref=/focusonfunds