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.
Support MFO
Donate through PayPal
The Closing Bell: Nasdaq Leads U.S. Stock Drop With 2.6% Loss
It wasn't as bad as it looks for a fully diversified portfolio, perhaps .2% - .3% loss for a globally diversified moderate allocation portfolio. This is why having such a portfolio is a good thing.
Undiversified alpha males are getting slaughtered though.
I'd much rather see up days in the market. No doubt, down days are also a part of investing. I have my portfolio benchmarked against the Lipper Balanced Index. Thus far, year-to-date the Index is up 1.68% and I am up 2.25%. For the week the Index is up 0.40% and I am up 0.56% and for the day the Index was down 0.57% and I was down 0.49%. With this, I am pleased.
I wonder how those alpha types that are running a focus type portfolio are fairing? I believe one alpha in paticular preached volumes about running a concertrated portfolio.
@old_skeet, didn't mean to start a chest thumping war with alpha males! Short term performance implies very little after all. Concentrated portfolios are just fine for active investors as long as they know what they are doing even if they may get crushed at times.
I am curious about your use of lipper balanced fund index as your benchmark. Isn't that an inappropriate one for comparing your performance? It is overweighted with domestic assets and contains funds that mostly have a fixed allocation.
Wouldn't benchmarking relative to a good world allocation fund such as GBLAX be a better benchmark. With the number of funds you have of all asset classes, it will probably mimic a fund like this one.
GBLAX is carrying to great of a foreign allocation and seems to be split about equally between domestic and foreign in the stock area. According to M* Xray, GBLAX is about 10% cash, 30% US stock, 29% foreign stock, 27% bonds, and 4% other. Whereas, I am about 20% cash, 30% US stock, 15% foreign stock, 25% bonds and 10% other.
I match up better against Franklin Balanced fund (FBLAX) although I am a little heavier in foreign stock than they are but the rest of the assets match up better with respect to its domestic stock, bonds, cash and other assets weightings although there are some differences.
As you probally know being classified a domestic balanced fund does not preclude it from holding foreign stocks as the Lipper Balanced Index is made up of the 30 largest funds in the Lipper Balanced objective and does not include multiple share classes of the funds within the index. Since, I am about two thirds domestic and one third foreign in my stock allocation I think the Lipper Balanced Index is the better choice over a global balanced type fund. A conserative or a moderate allocation fund might even be a better benchmark. LABFX seems to be much closer over GBLAX to my allocation however I am holding more cash and would therefore expect to trail it in an up trending market. It's allocation is about 3% cash, 38% US stock, 14% foreign stock, 32% bonds, and 12% other.
I still feel overall the Lipper Balanced Index is a good reference point. Many balanced funds have a walking allocation so to speak and as of my last look ABALX was holding about 72% in stocks (65% in US stocks and 7% in foreign stocks). At times, the Index has bettered me and at times I have bettered it. There are other benchmarks found in a report compiled by the WSJ that is titled Mutual Fund Yardsticks. Within this report there are two fund objectives that might fit, a Stock & Bond category and a Balanced Fund category . However, the Lipper Balaned Index seems to be the tougher Index to beat over these.
I have linked the Yardstick report for those that might wish to have a look.
Cman, if there is another balanced fund or an index that you know of that is easily referenced and you feel might be a better benchmark please let me know. For now, I plan to stick with the Lipper Balanced Index as my benchmark; however, I am open to thoughts and suggestions.
In the past, before you came, I enjoyed reading when others would chime in and report how they were fairing and what their benchmarks were. What they were seeing and how they were positioning. In more recent times this seems to have wained. Catch 22 was good about reporting his returns but often caught flack form doing so. There was one alpha, I felt, that picked on Catch a good bit and at great lengths. I felt in a subtle way I could get a dig in towards this alpha with my performance comment. I beleive he may have barked at you when you first came. My comment was not ment to be a chest thump. Although, seems you, perhaps others, might have taken it that way.
We all have to establish ourselves and at times hold our ground. It saddens me greatly that Catch 22 does not post like he use to. Others, just moved on. And, yes ... I am still a little miffed as to how some have been treated. Still this subject alpha does a great deal to make this one of the better investment boards on the net. And, I appreciate that too plus the others that make this happen.
My late father's posture was to be sturdy like a tree and stand your ground but also be flexible enough to give to the wind.
Thanks again for your thoughts and comments. They were appreciated.
My Master Portfolio has a Forward P/E Ratio of 15.6 and at Trailing P/E Ratio of 16.3 with a value tilt along with being overweight to the defensives. It will usually better the Lipper Balanced Index in a downdraft and trail it in an updraft. It does not hold a lot of high flying, high P/E mutal funds although it does have a representation in them. They are mostly found in the specality sleeve which is a small part of the overall portfolio. They have also have been found in other sleeves, at times, as well.
I am more of a steady Eddie, meat and potato, type investor with a portfolio that has a yield of better than a good number of fixed income bond funds but with the performance of a conserative growth fund. Right now it seems to be in good (not great) sync with the markets.
"Isolated lurches in the Nasdaq 100 Index have become more common in the last two months as investors reassessed equities that have posted annual gains of 25 percent since 2009. The gauge twice tumbled more than 1.8 percent over two-day stretches last week and lost 2.1 percent on March 13 and 14."
I personally wonder where margin debt has been positioned lately. Hot stock sectors often expand and contract as margin (borrowed money) positions increase and shrink. Not sure where we stand now with margin debt in the market, but I wouldn't be surprised if some of that money is coming off the table on days like this.
I believe we have reached a point where some of this QE (borrowed money) has spilled over into margin accounts (borrowed money) to buy stocks. Reminds me of the saying, "I know a guy, who knows a guy, who thinks he knows a guy."
My concern is that when the government provides reserves (money) to the banks and also pays interest to the banks to hold this liquidity it's no surprise to me that banks figure out ways to put this borrowed money to work. I worry that these same banks have somehow promoted margin account use and other risky ventures. I believe QE has not only prop up the economy, but where banks are backstopped (by reserves and free interest from the government) this "better than risk free money" ends up too easily in margin debt and other bubble inducing activities.
Hi Hank. If you are looking for an alternative replacement for your market neutral fund, give RGHVX at least a look. I bought it about a year ago and have been very pleased with how it handles the ups and downs in the market. Steady-Edie so far.
One of the few things that did well for me were the CHS Preferred shares, but other than that, was bad or worse pretty much across the board (aside from AQR Commodity and Whitebox, as well as a couple other minor things - CNQ, for example.)
That would indeed take a lot of diversification, as aggregate bonds were only up 0.2-0.3%.
Take any of the published 60/40 lazy portfolio with the typical large/small and value/growth split with allocation to international and REITs and the bonds in Treasuries and you will likely find them with around 0.3% loss.
People with diversification and large losses may have too many correlated asset classes in their portfolios.
The point, however, was that this was not a broad sell off globally as may happen in a correction, just the recent high flyers getting slaughtered.
@old_skeet, no single bench mark would be appropriate for all. The goal of a benchmark is first to make sure that one isn't destroying their portfolio with meddling and then to see if they are realizing some benefit such as higher volatility adjusted returns from their active allocation. If not, either change the strategy or go to a more passive strategy for allocation.
I would recommend choosing a fund or a minimal portfolio you would have hypothetically invested in if you didn't want to actively manage your allocation for the first above. Feed your portfolio to a portfolio analyzer and choose an allocation fund that is closest in volatility and capture ratios to your portfolio for the second benchmark above. Percent allocations don't mean anything since you can have a 30% risky allocation in domestic equities beating a 60% conservative allocation in the same. Volatility and drawdowns expose some of this.
The use of an average of funds benchmark suffers from flaw of averages and not very meaningful in my opinion.
Thanks for your additional comments. I looked at using my domestic hybrid sleeve as a bench mark through an Instant Xray analysis and when adjusting the amount of cash (percent wise) held it Xrayed much to that of my portfolio as a whole. Performance wise they are tracking pretty close along with their allocations. I guees, with this, it can become a second bench mark to the primary Lipper Balanced Index that I am currently using. I have all my portfolio sleeves set up in a spread sheet for easy tracking. I track many items form percent gains by the day, week, month, three months, one year, three years and five years, yield, duration, P/E Ratios, % off 52 week high, plus some other good stuff I'd rather not write about.
I do like the Lipper Balanced Index because it is a recgonized standard by many. As you are aware many mutual funds use the S&P 500 Index as a bench mark even though some have issue with this ... It is a recgonized standard. I use it on the equity side of my portfolio as my standard and for the fixed income sleeve I use a popular bond indexed fund, and for the portfolio as a whole, know as my master portfolio, I have been using the Lipper Balanced Index.
Comments
Undiversified alpha males are getting slaughtered though.
I'd much rather see up days in the market. No doubt, down days are also a part of investing. I have my portfolio benchmarked against the Lipper Balanced Index. Thus far, year-to-date the Index is up 1.68% and I am up 2.25%. For the week the Index is up 0.40% and I am up 0.56% and for the day the Index was down 0.57% and I was down 0.49%. With this, I am pleased.
I wonder how those alpha types that are running a focus type portfolio are fairing? I believe one alpha in paticular preached volumes about running a concertrated portfolio.
Old_Skeet
I am curious about your use of lipper balanced fund index as your benchmark. Isn't that an inappropriate one for comparing your performance? It is overweighted with domestic assets and contains funds that mostly have a fixed allocation.
Wouldn't benchmarking relative to a good world allocation fund such as GBLAX be a better benchmark. With the number of funds you have of all asset classes, it will probably mimic a fund like this one.
Thanks for your comments and your suggestion.
GBLAX is carrying to great of a foreign allocation and seems to be split about equally between domestic and foreign in the stock area. According to M* Xray, GBLAX is about 10% cash, 30% US stock, 29% foreign stock, 27% bonds, and 4% other. Whereas, I am about 20% cash, 30% US stock, 15% foreign stock, 25% bonds and 10% other.
I match up better against Franklin Balanced fund (FBLAX) although I am a little heavier in foreign stock than they are but the rest of the assets match up better with respect to its domestic stock, bonds, cash and other assets weightings although there are some differences.
As you probally know being classified a domestic balanced fund does not preclude it from holding foreign stocks as the Lipper Balanced Index is made up of the 30 largest funds in the Lipper Balanced objective and does not include multiple share classes of the funds within the index. Since, I am about two thirds domestic and one third foreign in my stock allocation I think the Lipper Balanced Index is the better choice over a global balanced type fund. A conserative or a moderate allocation fund might even be a better benchmark. LABFX seems to be much closer over GBLAX to my allocation however I am holding more cash and would therefore expect to trail it in an up trending market. It's allocation is about 3% cash, 38% US stock, 14% foreign stock, 32% bonds, and 12% other.
I still feel overall the Lipper Balanced Index is a good reference point. Many balanced funds have a walking allocation so to speak and as of my last look ABALX was holding about 72% in stocks (65% in US stocks and 7% in foreign stocks). At times, the Index has bettered me and at times I have bettered it. There are other benchmarks found in a report compiled by the WSJ that is titled Mutual Fund Yardsticks. Within this report there are two fund objectives that might fit, a Stock & Bond category and a Balanced Fund category . However, the Lipper Balaned Index seems to be the tougher Index to beat over these.
I have linked the Yardstick report for those that might wish to have a look.
http://online.wsj.com/mdc/public/page/2_3023-fundyrdstick.html?mod=topnav_2_3020
Cman, if there is another balanced fund or an index that you know of that is easily referenced and you feel might be a better benchmark please let me know. For now, I plan to stick with the Lipper Balanced Index as my benchmark; however, I am open to thoughts and suggestions.
In the past, before you came, I enjoyed reading when others would chime in and report how they were fairing and what their benchmarks were. What they were seeing and how they were positioning. In more recent times this seems to have wained. Catch 22 was good about reporting his returns but often caught flack form doing so. There was one alpha, I felt, that picked on Catch a good bit and at great lengths. I felt in a subtle way I could get a dig in towards this alpha with my performance comment. I beleive he may have barked at you when you first came. My comment was not ment to be a chest thump. Although, seems you, perhaps others, might have taken it that way.
We all have to establish ourselves and at times hold our ground. It saddens me greatly that Catch 22 does not post like he use to. Others, just moved on. And, yes ... I am still a little miffed as to how some have been treated. Still this subject alpha does a great deal to make this one of the better investment boards on the net. And, I appreciate that too plus the others that make this happen.
My late father's posture was to be sturdy like a tree and stand your ground but also be flexible enough to give to the wind.
Thanks again for your thoughts and comments. They were appreciated.
Old_Skeet
With SP500 off 1.3? Tech off 2.6%?
That would indeed take a lot of diversification, as aggregate bonds were only up 0.2-0.3%.
I did see that GLD (for a change) and some EMs were up also.
My only positives for day were WBMIX, SIGIX, HCP, and APA.
My Master Portfolio has a Forward P/E Ratio of 15.6 and at Trailing P/E Ratio of 16.3 with a value tilt along with being overweight to the defensives. It will usually better the Lipper Balanced Index in a downdraft and trail it in an updraft. It does not hold a lot of high flying, high P/E mutal funds although it does have a representation in them. They are mostly found in the specality sleeve which is a small part of the overall portfolio. They have also have been found in other sleeves, at times, as well.
I am more of a steady Eddie, meat and potato, type investor with a portfolio that has a yield of better than a good number of fixed income bond funds but with the performance of a conserative growth fund. Right now it seems to be in good (not great) sync with the markets.
Old_Skeet
"Isolated lurches in the Nasdaq 100 Index have become more common in the last two months as investors reassessed equities that have posted annual gains of 25 percent since 2009. The gauge twice tumbled more than 1.8 percent over two-day stretches last week and lost 2.1 percent on March 13 and 14."
U.S. Stocks Fall as Technology Selloff Drops Nasdaq Index
My Take:
I personally wonder where margin debt has been positioned lately. Hot stock sectors often expand and contract as margin (borrowed money) positions increase and shrink. Not sure where we stand now with margin debt in the market, but I wouldn't be surprised if some of that money is coming off the table on days like this.
I believe we have reached a point where some of this QE (borrowed money) has spilled over into margin accounts (borrowed money) to buy stocks. Reminds me of the saying, "I know a guy, who knows a guy, who thinks he knows a guy."
My concern is that when the government provides reserves (money) to the banks and also pays interest to the banks to hold this liquidity it's no surprise to me that banks figure out ways to put this borrowed money to work. I worry that these same banks have somehow promoted margin account use and other risky ventures. I believe QE has not only prop up the economy, but where banks are backstopped (by reserves and free interest from the government) this "better than risk free money" ends up too easily in margin debt and other bubble inducing activities.
Crazy talk? Maybe.
People with diversification and large losses may have too many correlated asset classes in their portfolios.
The point, however, was that this was not a broad sell off globally as may happen in a correction, just the recent high flyers getting slaughtered.
I would recommend choosing a fund or a minimal portfolio you would have hypothetically invested in if you didn't want to actively manage your allocation for the first above. Feed your portfolio to a portfolio analyzer and choose an allocation fund that is closest in volatility and capture ratios to your portfolio for the second benchmark above. Percent allocations don't mean anything since you can have a 30% risky allocation in domestic equities beating a 60% conservative allocation in the same. Volatility and drawdowns expose some of this.
The use of an average of funds benchmark suffers from flaw of averages and not very meaningful in my opinion.
Thanks for your additional comments. I looked at using my domestic hybrid sleeve as a bench mark through an Instant Xray analysis and when adjusting the amount of cash (percent wise) held it Xrayed much to that of my portfolio as a whole. Performance wise they are tracking pretty close along with their allocations. I guees, with this, it can become a second bench mark to the primary Lipper Balanced Index that I am currently using. I have all my portfolio sleeves set up in a spread sheet for easy tracking. I track many items form percent gains by the day, week, month, three months, one year, three years and five years, yield, duration, P/E Ratios, % off 52 week high, plus some other good stuff I'd rather not write about.
I do like the Lipper Balanced Index because it is a recgonized standard by many. As you are aware many mutual funds use the S&P 500 Index as a bench mark even though some have issue with this ... It is a recgonized standard. I use it on the equity side of my portfolio as my standard and for the fixed income sleeve I use a popular bond indexed fund, and for the portfolio as a whole, know as my master portfolio, I have been using the Lipper Balanced Index.
Thanks again ...
Old_Skeet