Our Funds Boat, Week + .20%, YTD + 5.43%, Rotation City? 4.21.2012

catch22

Howdy,

Again, a thank you to all who post the links and also 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.

NOTE: For those who visit MFO, 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 equity and bond kids continue the battle. While there remains decent YTD returns in many equity sectors, the bond kids are not buying into the whole picture; at least as is reflected in the so-called "safe harbor" issues of the U.S. Treasury, German bunds, British gilts and Japan's bonds. The Spanish bond auctions this past week performed better than I expected. However, both the Spanish and Italian 10 year bonds remain close to a 6% yield. While this yield would not be out of place during a period of growth for these or other country economies; I am not convinced that such a yield/payment burden upon these two countries is sustainable given the current existing debt burdens, delevering at many levels, potential for growth and ongoing austerity programs. If one could find a statistic; I would not be surprised to find for this summer, that the number of increase in size or new vegetable gardens among the citizens of Greece, Italy and Spain, in particular, as well as many other European countries. This would be another indicator of economic quality.
As to sector rotations; at least relative to the U.S. (Note: any given fund in any of these sectors will have varing degrees of performance based upon where the manager(s) choose to be invested.)

--- U.S. equity +1.5 through - 1.2%, avg. = +.6%
--- Int'l equity +3 through 0%, avg. = +1.4%
--- U.S. eq. sectors +4 through -2.6%, avg. = +.5%
--- U.S. IG bonds +.2 through 0%, avg. = +.05%
--- HY bonds +.7 through +.1%, avg. = +.3%

The best groups among the equity sectors were health/medical, utilities and consumer staples. The best average in the IG bonds were TIPS funds. Int'l equity (generally Europe) performed much better than the broad U.S. equities. There is an obvious large spread among some of the areas listed above. Now if we can only discover the forward paths.

Meanwhile, the IMF continues to beg for money to support and/or stablize some European countries. To a point, I don't really care about or give credit to words that continue to flow from the mouths of many of the heads of these various groups. On any given day one may find a reversal of what these folks word to the microphone about the quality of a region or the prospect for global growth. Behind closed doors, I suspect one would find a great deal of concern as to "how do we get out of this mess?" Of course, a possible true scenario may be that "reality bites" and to allow the unwind to take place. Perhaps this is the plan with all of the money being thrown about; as what took many years to acccumlate will also take many years to unwind. Sadly, the uttered and changing words and thoughts from some of these folks in high places is of little value or comfort; and only causes more uncertainty. I find very few upfront leaders anywhere who are associated with politics, governments or the numerous global monetary organizations. Surprise, surprise; eh?
You may consider our portfolio to be quite boring, but you may be assured that it moves and bends about each and every day; from forces beyond our control. We retail investors will find many interesting investment periods to ponder, as usual, in the coming years.

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 + .20 % move this past week. Sidenote: The average return of 200 combined Fidelity retail funds across all sectors (week avg = +.16, YTD +8.8%). What is cash? This is a periodic question at MFO. For our house, we consider our IG bond holdings to be our cash in the current market conditions. One will find MM funds as a pure cash acct.; but even if fees are waived at this time, the average return for the past 3 years for a MM fund we could use (FDRXX) is .01%. Our IG bond funds have an average .45% expense ratio. An interesting question arises as to why in the world would one use a TIPS fund at all, let alone as a cash holding; and especially with the most recent TIPS auction closing with another negative yield? Move past the negative yield thought and to the fact that the yield also currently reflects a price/NAV increase. This is where the money is made today. Our two TIPS funds, APOIX and FINPX have YTD's of 1.9% and 2.2%, respectively. We find this return acceptable for parked money; with the added bonus of total flexibility to move the monies on a days notice to something more favorable.

The old Funds Boat is at anchor, riding in the small waves and watching the weather. 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 we watch for psuedo benchmarking are the following:
***Note: these YTD's per M*

VWINX .... + .64 week, YTD = + 3.92%
PRPFX .... + .44 week, YTD = + 4.82%
SIRRX ..... + .13 week, YTD = + 2.47%
TRRFX .... + .51 week, YTD = + 6.08%
VTENX ... + .47 week, YTD = + 5.39%
HSTRX .... - .16 week, YTD = + .07% (to be removed, fund no longer matches our mix)

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 March 9, 2012---

U.S.Stocks 10.5%
Foreign Stocks 6.8%
Bonds 78.5% ***
Other 4.2%
Not Classified 0.00%

***about 35% of the bond total are high yield category (equity related cousins)

---This % listing is kinda generic, by fund "name"

-Investment grade bond funds 26.8%
-Diversified bond funds 19.8%
-HY/HI bond funds 23.2%
-Total bond funds 17.8%
-Foreign EM/debt bond funds 4.3%
-U.S./Int'l equity/speciality funds 8.1%

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
APOIX 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
TEGBX Templeton Global (load waived)
LSBDX Loomis Sayles

---Speciality Funds (sectors or mixed allocation)
FRIFX Fidelity Real Estate Income (bond/equity mix)
FDLSX Fidelity Select Leisure
FSAGX Fidelity Select Precious Metals
RNCOX RiverNorth Core Opportunity (bond/equity)

---Equity-Domestic/Foreign
FDVLX Fidelity Value
FSLVX Fidelity Lg. Cap Value
FLPSX Fidelity Low Price Stock
MACSX Matthews Asia Growth-Income

hank

Catch, May I suggest rather than using Hussman's Total Return Fund (HSTRX) as one of your "pseudo benchmarks", you instead use his Strategic Growth Fund (HSGFX)? This would result in your out-distancing Dr. Hussman by an additional 5.80% YTD. While it's admittedly hard to understand the inner workings of HSGFX (puts, calls, options), HSTRX appears decidedly more conservative than what you are attempting to accomplish with your fund boat. In its Dec 31, 2011 semi-annual report, HSTRX reported having over 34% of its assets invested in money market funds, about 20% in stocks (mostly mining shares), and the remainder in U.S. Treasury bonds and bills - most with under 5 years to maturity. The fund reported holding no sub-Investment grade debt - nor has it ever to my recollection. By contrast, if I'm reading your synopsis correctly, you hold 27-28% in high yield bonds with 0% in money market funds. This appears to make your risk profile considerably higher than what Hussman intends for HSTRX.

Additionally, may I suggest using one of T Rowe Price's highly regarded Retirement Target-Date funds as a future pseudo benchmark along with the others you have chosen? Linked is a M* report from Dec. 31, 2011 which ranks these funds as a group in the upper 20% of their peers. One of the most conservative TRRFX (Retirement 2005) is designed by Price for those who attained age 65 in 2005 (age 72 today). As of Dec. 31, 2011 the fund held 45% in equities. YTD it is up 6.08%.


http://news.morningstar.com/pdfs/STUSA04OMN.pdf

MikeM

Reply to @hank: Hi Hank. The TRP Target funds are exactly what I use as bench marks. And honestly, some times I wonder why I bother with putting my own portfolio together. Those all-in-one funds are pretty darn good. I think I just like "the game" of putting together my own group of funds. But anyone who struggles with that or just doesn't like to do the work should absolutely be in a Target Date fund - and T. Rowe Price, I think, has some of the best.

And one more word on these funds; I would suggest anyone using the funds should only use the "target" retirement date as a guide. More important is to match the fund to your risk tolerance, not necessarily your age. If you are comfortable with 40% stocks, use the retirement fund. If you are more comfortable with 50% stock, use 2005. I think the 2015 fund is closer to the standard 60:40 stock:bond mix.

Anyway, these funds are a pretty good bench mark and a challenge to beat.

catch22

Hi hank,

This weekend, I did look at HSTRX and thought the same thing.......this one is no longer a reference point.....I did a "bark-bark" when looking at the week/YTD.

I appreciate your thoughts about a change.

As for HSGFX, I don't think this fund reflects our holdings, as the fund is equity based and long/short.
I do have as a reference, the TRRFX (target date 2005), which you mentioned a year or so ago. I do believe I will use this and VTENX (target date 2010) that I have also been watching.
Not that you are not aware of (but for other readers) TRRFX's holdings, but I will blip a few notes about both of these funds, per M*.

--- TRRFX, TD 2005, nominal 50/50 eq/bond; 33% u.s. eq., 13% int'l eq.; 66% AAA bonds, 34% HY type, yield = 2.5%

--- VTENX, TD 2010, nominal 50/50 eq/bond; 32% u.s. eq., 13% int'l eq.; 92% AAA bonds, 8% HY type, yield = 2.5%

These two are not twins, but may reflect a bit closer to our current holdings. We don't have a true 50% in equity, but the 34% of our bonds that are HY move the equity-like closer to the 50% mark.

I will pull HSTRX and replace with the two above.

Take care of you and yours,
Catch

catch22

Hi MikeM,

You noted: "And honestly, some times I wonder why I bother with putting my own portfolio together. I think I just like "the game" of putting together my own group of funds."
I agree with both statements. The putting it together is part of who we are, eh? This is a result for me, of my curious nature; that over many years has found this house involved in investing. Not that I am note curious about many other areas. I know all of this curiousity helps our house pull in as much investment information as we choose to handle, review the researched ingredients and decide what to finally place into the investment portfolios "blender". 'Course the end result is to find whether the cooked "stew" mix is edible; or needs fixing.

Thinking about putting things together will keep one on the ball, sharp about the too much info syndrome and with a steady nature; should allow one to find a satisfactory result from the passion and knowledge.

Take care,
Catch

hank

Reply to @MikeM: Thanks Mike for pointing that out. Risk tolerance is very important and these are on the aggressive side - as the M* report mentions. They are hard to beat in good markets. And, after a 3+ year bull, now may not be a great time to be throwing $$ at them - regardless of age.

hank

Hi Catch. Thanks for the reply. I'll confess jerkin your string a little with the HSGFX suggestion (too easy a target anyway. You are to be commended for including a variety of benchmarks against which to measure performance - and which should reflect different approaches to a retirement portfolio. Either TRRIX or TRRFX would seem an excellent choice for inclusion. As noted, the whole series is on the aggressive side and may well outperform other retirement approaches during bull markets. Would, however, provide a nice off-set to the Northern Lights fund (SIRRX) whose approach seems remarkably devoid of equities. Have linked its allocation below. Take care, hank

http://funds.usatoday.com/funds/holdings.idms?SYMBOL_US=SIRRX

catch22

Hi hank,

Yes, SIRRX is showing to be a bit of a strange duck, too. A more conservative retirement fund than I though it might become and/or remain.
Knowing that many of us use our own benchmarkets privately; not unlike the ongoing chit-chat here; I hope the benchmarks we show may be of some benefit to those we know read through MFO, but either seldom or never comment.
The most difficult part (sometimes) for any jabber I post is to not forget that the mix of age groups and investment knowledge spans a vast range.
The "ease of use" from the wonderful program Accipiter set for use here with the tickers; lets folks jump to their favorite sniffing site to get further knowledge about the fund noted. This is part of the reason for placing the psuedo benchmarks.
We're all traveling a grand investment road here from the value of, to and for the participants at MFO. What a delightful place.

I gotta go outside to catchup on some chores. The wind here today, is strong and cold, from the northeast.

Take care,
Catch

hank

Reply to @catch22: fwiw - no problem here with your keeping SIRRX. Speaks volumes about the different approaches to "retirement" investing. (Who knows - they could be proven right.) IMHO, as long as benchmarks reflect a good mix of different approaches, don't think anyone can fault them.