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The Paradox Of Choice: Can You Have Too Many Investment Options?
For those that have chosen, as I have, to run with a good number of funds, for me it is fifty two, you might enjoy reading about FMD Capital's sleeve system.
I have linked it below for your reading enjoyment.
Thanks @Old_Skeet. That was informative. While I do have some core holdings I have had for a long time, part of my portfolio is tactical in nature. Part of that is somewhat medium to long term and part is shorter term. The sleeve system has some of those characteristics.
@Old_Skeet If it wouldn't be too much trouble, I'd like to know what was the average return of your 52 funds in 2013 & 2014 along with the average cost. Regards, Ted
When you make a call like this ... show and tell ... you will have to provide the same information sought. Please, show your details first; and, then I'll post mine as reported by Morningstar portfolio.
@Old_Skeet May I ask a more discrete question? How are your finds doing relative to their benchmark indices?
I used to own a lot of funds. I seemed to buy at the peak of the managers' performance, watch his/her performance fall off, then wonder what to do with the fund (which all too often was to sell after the manager was underperforming for 3 years or so)
@Old_Skeet FYI: Regards, Ted PFF: 2013: -(0.90)% 2014: 14.10% ER: .47% Two Year Average Return: 6.6% SPY: 2013: 32.21% 2014: 13.46% ER: .11% Two Year Average Return: 22.84% QQQ: 2013: 36.63% 2014: 19.18% ER: .26% Two Year Average Return: 27.91% PRHSX: 2013: 51.40% 2014: 31.94% ER: .79% Two Year Average Return: 41.67% FBTCX: 2013: 62.44% 2014: 33.35% ER: 1.83% Two Year Average Return: 47.90%
Two Year Average Cost: 0.692% Two Year Average Return: 29.38%
The Mutual funds held along with cost basis and their respective performance data was removed on Feburary 18; however, the performance data remains for the portfolio as a whole plus I added a blurb about my sleeve system.
Portfolio 2015 YTD (2.70%) .. 2014 (6.03%) .. 2013 (17.71%) .. 2012 (14.18) (Data From Morningstar as of 2/20/2015)
Old Skeet's Portfolio Investment Sleeve Managment System
Here is a brief description of my sleeve system which I organized to help better manage the investments that were held in five accounts. The accounts consist of a taxable account, a self directed ira account, a 401k account, a profit sharing account and a health savings account plus two bank accounts. With this I came up with four investment areas. They are a cash area which consist of two sleeves … an investment cash sleeve and a demand cash sleeve. The next area is the income area which consists of two sleeves. … a fixed income sleeve and a hybrid income sleeve. Then there is the growth & income area which has more risk associated with it than the income area and it consist of four sleeves … a global equity sleeve, a global hybrid sleeve, a domestic equity sleeve and a domestic hybrid sleeve. An finally there is the growth area, where the most risk in the portfolio is found and it consist of four sleeves … a global sleeve, a large/mid cap sleeve, a small/mid cap sleeve and a specialty sleeve. Each sleeve consists of three to six funds (in most cases) with the size and the weight of each sleeve can easily be adjusted, from time-to-time, by adjusting the number of funds and the amounts held. By using the sleeve system one can get a better picture of their overall investment picture and weightings by sleeve and area. In addition, I have found it beneficial to xray each fund, each sleeve, each investment area, and the portfolio as a whole monthly. Again, weightings can be adjusted form time-to-time as to how I might be reading the markets and wish to weight accordingly. All funds pay their distributions to the cash area of the portfolio with the exception being those in my 401k, profit sharing, and health savings accounts where reinvestment occurs. With the other accounts paying to cash the cash area builds cash within the portfolio to meet the portfolio’s monthly cash distribution needs with the residual being left for new investment opportunity. In addition, most all buy/sell trades settle from, or settle to, the cash area.
Here is how I have my asset allocation currently broken out in percent ranges, by area. My neutral targets are cash 15%, income 30%, growth & income 35%, and growth 20%. I do an Instant Xray analysis of the portfolio monthly and make asset weighting adjustments as I feel warranted based upon my assesment of the market, my risk tolerance, cash needs, etc. Currently, I am neutral in the cash area, light in the income area and heavy in the equity area. I am thinking that once year end mutual fund capital gain distributions are paid out this will somewhat reduce the equity area and raise the cash area.
Cash Area (Weighting Range 5% to 25%) Demand Cash Sleeve… (Cash Distribution Accrual & Future Investment Accrual) Investment Cash Sleeve … (Savings & Time Deposits)
Income Area (Weighting Range 20% to 40%) Fixed Income Sleeve: EVBAX, LALDX, THIFX, LBNDX, NEFZX & TSIAX Hybrid Income Sleeve: AZNAX, CAPAX, FKINX, ISFAX, PASAX & PGBAX
Growth & Income Area (Weighting Range 25% to 45%) Global Equity Sleeve: CWGIX, DEQAX, EADIX & PGUAX Global Hybrid Sleeve: CAIBX, IGPAX & TIBAX Domestic Equity Sleeve: ANCFX, CFLGX, FDSAX, INUTX, NBHAX, SPQAX & SVAAX Domestic Hybrid Sleeve: ABALX, AMECX, DDIAX, FRINX, HWIAX & LABFX
Growth Area (Weighting Range 10% to 30%) Global Sleeve: ANWPX, PGROX, THOAX, DEMAX, NEWFX & THDAX Large/Mid Cap Sleeve: AGTHX, BWLAX, HWAAX, IACLX, SPECX & VADAX Small/Mid Cap Sleeve: AJVAX, IIVAX, PCVAX & PMDAX Specialty Sleeve: CCMAX, JCRAX, LPEFX, SGGDX & TOLLX
Total number of mutual fund investment positions currently held equal fifty three.
@Maurice - Holy Bazinga! Does the company you work for provide any guidance whatsoever at working through those 341 choices or do they just hand you the list and say pick something? I'm having this vision of the new hire being handed a list of fund names and average annual returns but hopefully they get more than that. I can't even imagine trying to choose from Skeet's list.
It's the ultimate insult!, Buffett says 'I'm smart enough to invest on my own...but you are not"...Guarantee Buffett couldn't run a Dairy Queen...so is he really that much smarter than you? He doesn't know how to buy a new car, or fix his lunch, or buy a Modern suit, do you? well then...Who's smart?
At your suggestion I did a little work and added fund number fifty three. The fund is AJVAX and is a foreign small/mid cap fund which was added to my small/mid cap sleeve in the growth area of the portfolio. I have edited my holdings and comments to reflect this addition in my above comment to you within this thread.
Have a good weekend ... and, I wish all "Good Investing."
Not that this would be of interest, but I think there are studies backing up this investopedia entry, though I am having trouble finding them; will plug onward:
\\\ ... there's no magical "right" number of mutual funds for your portfolio. Despite the lack of agreement among the professionals regarding how many funds are enough, nearly everyone agrees that there is no need for dozens of holdings.
Old_Skeet can clarify this but I think when he is monitoring his portfolio he is doing it by sleeve. That way his attention is only to those funds within that sleeve and not the entire 53. Compare that to my portfolio with only 11 funds. I watch all the funds at the same time instead of 5 or 6 within a sleeve.
If someone were to hold a large number of funds like OS, the sleeve method is probably the best.
You are correct in your assumption that I Xray each sleeve to see how it is formulated and make changes within a sleeve, or sleeves, as I feel warranted.
Recently, I added another fund (#53) to my small/mid cap sleeve to get some foreign small/mid cap exposure that I felt was needed within this sleeve. I have found that it is easier to tweak changes by the sleeve over the portfolio as a whole. But, after I make changes within a sleeve I’ll then check the portfolio as a whole through Xray to see how the changes have blended.
While some may think that my high fund number count is way too high; it is what it is because it covers the holdings of five accounts not counting my bank accounts where a good deal of my cash is held. I have found my sleeve system to be a neat and cleaver way to combine it all together and know what one has. And, besides if one fund, or even a couple, fail to meet expectations then the impact is far less than one failing to meet expectations within a portfolio of say only a few funds. With my system if one fund in a sleeve falterns then there are the other two to five, perhaps six, to provide production and continue to propel the sleeve.
Although my performance for 2014 was not what I was seeking it boils down to my diversification. Sometimes diversification does that; but, my portfolio is designed to have something working most all the time. As a matter of fact I track it to see just how much of it is in the faster market current each week form a style, sector, and geographic orientation. Right now it is moving pretty well due to my foreign holdings as they seem to be moving faster than my domestic ones although domestic has had a few good weeks of late. In comparison, year-to-date I am up 2.7% while my bogey the Lipper Balanced Index (LBI) is up 2.3%. Last year I trailed my bogey but bettered it the three years prior. From my perspective, if I failed to better my bogey for a continued period of time and an on going basis then I'd be doing something wrong. With my system it is easy to make changes, monitor and measure against a benchmark. Most every sleeve has a benchmark with the exceptions being the cash and the specialty sleeves.
Where it has a rub, for a good number on the board, is that what I am doing is just not natural for those that seem to have issue with it.
It works for me; and, to me, that is what is of the upmost of importantance.
To each his own but I have found managing employees or hens in the henhouse, control has to be a consideration, There IS a level you start to lose it..... Concentration, attention span, organizational skills ect. all come into play and I find as I get older many skills are deteriorating....and my desire to do the organization work is getting less and things fall thru the cracks that wouldn't have...IMO Example: appointing 67yo people to very important positions in Running affairs in this country, A Mistake...IMO
Maybe you are not doing enough to keep the "old" mind sharp? Perhaps, there are things that are not yet known that might be factors. After all, as I recall, you seem to enjoy, from time-to-time, large quantities of adult beverages.
<"It works for me; and, to me, that is what is of the upmost of importantance."/i>
Exactly. We all have different views and methods in how we handle our investments. It would be pretty boring if everyone bought and held a S&P index fund.
Sounds like Skeet's willing to put more time and energy into tracking and managing funds than either I or most here are. Tracking is probably not too difficult, considering the sophisticated programs available today.
I've seen the arguments by some citing harmful effects from owning large numbers of funds. Their argument (sometimes bolstered with statistical data) is that duplicate holdings or off-setting holdings somehow adversely impact performance. I've never fully understood those arguments - nor have I investigated them very thoroughly. My admittedly simplistic response is that I'd be happy to own 15 funds just like PRWCX, but loath to own even one like HSGFX.
At one time I owned as many as 20. Have shaved that down to 11 plus an ultra-short, making 12 total. Two are held in both Roth and Traditional accounts, so am managing 14. In addition, we use a separate money market fund for household cash management.
I've never viewed this as an issue of which method promotes better returns. But I do like to keep things simple. For me anyway, having fewer funds makes it easier to maintain a perspective on how money is allocated. An additional benefit is that I find I do much less trading with the smaller number. Above all, it comes down to investor comfort. I'd no more criticize someone for the number of funds owned than for the size of car driven. To each his own.
My mind will never be as sharp as when I was Faced with daily business problems and financial decisions..... which I don't want or need today to Live a good life, "Simple" is a good way of life, "boring" is not...I worked to get "simple"..
@ Old_Skeet: From time to time I've come across comments on this board that at least 5% of portfolio must be invested in a fund to make a difference to the total portfolio return. Viewing your portfolio, leads me to believe you think the opposite. Do you try to keep your holdings, within the sleeve, with close to the same % of invested dollars? As for myself I lean toward to much cash on hand, but I like to sleep at night. I do have one fund FMIHX that contains over a 5% allotment of invested dollars. Total # of funds at this time 24, across 6 accounts.
Comments
I have linked it below for your reading enjoyment.
http://fmdcapital.com/wp/wp-content/uploads/2013/09/FMD_Income-Investing.pdf
Old_Skeet
Don't count "number of holdings"...
Regards,
Ted
When you make a call like this ... show and tell ... you will have to provide the same information sought. Please, show your details first; and, then I'll post mine as reported by Morningstar portfolio.
Old_Skeet
I like her....
I used to own a lot of funds. I seemed to buy at the peak of the managers' performance, watch his/her performance fall off, then wonder what to do with the fund (which all too often was to sell after the manager was underperforming for 3 years or so)
Regards,
Ted
PFF:
2013: -(0.90)%
2014: 14.10%
ER: .47%
Two Year Average Return: 6.6%
SPY:
2013: 32.21%
2014: 13.46%
ER: .11%
Two Year Average Return: 22.84%
QQQ:
2013: 36.63%
2014: 19.18%
ER: .26%
Two Year Average Return: 27.91%
PRHSX:
2013: 51.40%
2014: 31.94%
ER: .79%
Two Year Average Return: 41.67%
FBTCX:
2013: 62.44%
2014: 33.35%
ER: 1.83%
Two Year Average Return: 47.90%
Two Year Average Cost: 0.692%
Two Year Average Return: 29.38%
IMHO: One is enough. One-Hundred is not too many.
Maybe folks could find something else to argue about?
"Call Me Ray" TV beer commercial: http://www.dailymotion.com/video/x1zjehb_you-can-call-me-ray-1970s-tv-commercial_tv
"Call Me Ray" Comedy Routine (Broken Link?)
Here Is It Is ... (was).
The Mutual funds held along with cost basis and their respective performance data was removed on Feburary 18; however, the performance data remains for the portfolio as a whole plus I added a blurb about my sleeve system.
Portfolio 2015 YTD (2.70%) .. 2014 (6.03%) .. 2013 (17.71%) .. 2012 (14.18)
(Data From Morningstar as of 2/20/2015)
Old Skeet's Portfolio Investment Sleeve Managment System
Here is a brief description of my sleeve system which I organized to help better manage the investments that were held in five accounts. The accounts consist of a taxable account, a self directed ira account, a 401k account, a profit sharing account and a health savings account plus two bank accounts. With this I came up with four investment areas. They are a cash area which consist of two sleeves … an investment cash sleeve and a demand cash sleeve. The next area is the income area which consists of two sleeves. … a fixed income sleeve and a hybrid income sleeve. Then there is the growth & income area which has more risk associated with it than the income area and it consist of four sleeves … a global equity sleeve, a global hybrid sleeve, a domestic equity sleeve and a domestic hybrid sleeve. An finally there is the growth area, where the most risk in the portfolio is found and it consist of four sleeves … a global sleeve, a large/mid cap sleeve, a small/mid cap sleeve and a specialty sleeve. Each sleeve consists of three to six funds (in most cases) with the size and the weight of each sleeve can easily be adjusted, from time-to-time, by adjusting the number of funds and the amounts held. By using the sleeve system one can get a better picture of their overall investment picture and weightings by sleeve and area. In addition, I have found it beneficial to xray each fund, each sleeve, each investment area, and the portfolio as a whole monthly. Again, weightings can be adjusted form time-to-time as to how I might be reading the markets and wish to weight accordingly. All funds pay their distributions to the cash area of the portfolio with the exception being those in my 401k, profit sharing, and health savings accounts where reinvestment occurs. With the other accounts paying to cash the cash area builds cash within the portfolio to meet the portfolio’s monthly cash distribution needs with the residual being left for new investment opportunity. In addition, most all buy/sell trades settle from, or settle to, the cash area.
Here is how I have my asset allocation currently broken out in percent ranges, by area. My neutral targets are cash 15%, income 30%, growth & income 35%, and growth 20%. I do an Instant Xray analysis of the portfolio monthly and make asset weighting adjustments as I feel warranted based upon my assesment of the market, my risk tolerance, cash needs, etc. Currently, I am neutral in the cash area, light in the income area and heavy in the equity area. I am thinking that once year end mutual fund capital gain distributions are paid out this will somewhat reduce the equity area and raise the cash area.
Cash Area (Weighting Range 5% to 25%)
Demand Cash Sleeve… (Cash Distribution Accrual & Future Investment Accrual)
Investment Cash Sleeve … (Savings & Time Deposits)
Income Area (Weighting Range 20% to 40%)
Fixed Income Sleeve: EVBAX, LALDX, THIFX, LBNDX, NEFZX & TSIAX
Hybrid Income Sleeve: AZNAX, CAPAX, FKINX, ISFAX, PASAX & PGBAX
Growth & Income Area (Weighting Range 25% to 45%)
Global Equity Sleeve: CWGIX, DEQAX, EADIX & PGUAX
Global Hybrid Sleeve: CAIBX, IGPAX & TIBAX
Domestic Equity Sleeve: ANCFX, CFLGX, FDSAX, INUTX, NBHAX, SPQAX & SVAAX
Domestic Hybrid Sleeve: ABALX, AMECX, DDIAX, FRINX, HWIAX & LABFX
Growth Area (Weighting Range 10% to 30%)
Global Sleeve: ANWPX, PGROX, THOAX, DEMAX, NEWFX & THDAX
Large/Mid Cap Sleeve: AGTHX, BWLAX, HWAAX, IACLX, SPECX & VADAX
Small/Mid Cap Sleeve: AJVAX, IIVAX, PCVAX & PMDAX
Specialty Sleeve: CCMAX, JCRAX, LPEFX, SGGDX & TOLLX
Total number of mutual fund investment positions currently held equal fifty three.
I wish all ... "Good Investing."
Old_Skeet
Rest of the world, passive.
Sorry.
Just kidding.
Want to fuel speculation about redistribution of wealth.
So, when Warren Buffett says normal folks should just invest in index, what he's really saying is thank you for allowing me to better capitalize.
At your suggestion I did a little work and added fund number fifty three. The fund is AJVAX and is a foreign small/mid cap fund which was added to my small/mid cap sleeve in the growth area of the portfolio. I have edited my holdings and comments to reflect this addition in my above comment to you within this thread.
Have a good weekend ... and, I wish all "Good Investing."
Old_Skeet
Regards,
Ted
Not that this would be of interest, but I think there are studies backing up this investopedia entry, though I am having trouble finding them; will plug onward:
\\\ ... there's no magical "right" number of mutual funds for your portfolio. Despite the lack of agreement among the professionals regarding how many funds are enough, nearly everyone agrees that there is no need for dozens of holdings.
If someone were to hold a large number of funds like OS, the sleeve method is probably the best.
Thanks for stepping forward with your comment.
You are correct in your assumption that I Xray each sleeve to see how it is formulated and make changes within a sleeve, or sleeves, as I feel warranted.
Recently, I added another fund (#53) to my small/mid cap sleeve to get some foreign small/mid cap exposure that I felt was needed within this sleeve. I have found that it is easier to tweak changes by the sleeve over the portfolio as a whole. But, after I make changes within a sleeve I’ll then check the portfolio as a whole through Xray to see how the changes have blended.
While some may think that my high fund number count is way too high; it is what it is because it covers the holdings of five accounts not counting my bank accounts where a good deal of my cash is held. I have found my sleeve system to be a neat and cleaver way to combine it all together and know what one has. And, besides if one fund, or even a couple, fail to meet expectations then the impact is far less than one failing to meet expectations within a portfolio of say only a few funds. With my system if one fund in a sleeve falterns then there are the other two to five, perhaps six, to provide production and continue to propel the sleeve.
Although my performance for 2014 was not what I was seeking it boils down to my diversification. Sometimes diversification does that; but, my portfolio is designed to have something working most all the time. As a matter of fact I track it to see just how much of it is in the faster market current each week form a style, sector, and geographic orientation. Right now it is moving pretty well due to my foreign holdings as they seem to be moving faster than my domestic ones although domestic has had a few good weeks of late. In comparison, year-to-date I am up 2.7% while my bogey the Lipper Balanced Index (LBI) is up 2.3%. Last year I trailed my bogey but bettered it the three years prior. From my perspective, if I failed to better my bogey for a continued period of time and an on going basis then I'd be doing something wrong. With my system it is easy to make changes, monitor and measure against a benchmark. Most every sleeve has a benchmark with the exceptions being the cash and the specialty sleeves.
Where it has a rub, for a good number on the board, is that what I am doing is just not natural for those that seem to have issue with it.
It works for me; and, to me, that is what is of the upmost of importantance.
I wish all ... "Good Investing."
Old_Skeet
Concentration, attention span, organizational skills ect. all come into play and I find as I get older many skills are deteriorating....and my desire to do the organization work is getting less and things fall thru the cracks that wouldn't have...IMO
Example: appointing 67yo people to very important positions in Running affairs in this country,
A Mistake...IMO
1 Fund (SPY) + 2.77% YTD
53 Funds (???) +2.7% YTD
Regards,
Ted
Not intended to spark debate.
Maybe you are not doing enough to keep the "old" mind sharp? Perhaps, there are things that are not yet known that might be factors. After all, as I recall, you seem to enjoy, from time-to-time, large quantities of adult beverages.
Old_Skeet
Exactly. We all have different views and methods in how we handle our investments. It would be pretty boring if everyone bought and held a S&P index fund.
So your thought is an all stock etf (SPY) is a good comparison against a hybrid styled portfolio consisting of many category type funds?
Old_Skeet
I've seen the arguments by some citing harmful effects from owning large numbers of funds. Their argument (sometimes bolstered with statistical data) is that duplicate holdings or off-setting holdings somehow adversely impact performance. I've never fully understood those arguments - nor have I investigated them very thoroughly. My admittedly simplistic response is that I'd be happy to own 15 funds just like PRWCX, but loath to own even one like HSGFX.
At one time I owned as many as 20. Have shaved that down to 11 plus an ultra-short, making 12 total. Two are held in both Roth and Traditional accounts, so am managing 14. In addition, we use a separate money market fund for household cash management.
I've never viewed this as an issue of which method promotes better returns. But I do like to keep things simple. For me anyway, having fewer funds makes it easier to maintain a perspective on how money is allocated. An additional benefit is that I find I do much less trading with the smaller number. Above all, it comes down to investor comfort. I'd no more criticize someone for the number of funds owned than for the size of car driven. To each his own.
"Simple" is a good way of life, "boring" is not...I worked to get "simple"..
I wish you many more enjoyable days.
Peace,
Old_Skeet
As for myself I lean toward to much cash on hand, but I like to sleep at night. I do have one fund FMIHX that contains over a 5% allotment of invested dollars. Total # of funds at this time 24, across 6 accounts.
And good investing to you,
Derf