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How Should Active Management Fit Into One’s Portfolio?
Even if you find a good active manager .... How do you determine if it is a good time to put money into the market where good expected value can be had?
Even if you find a good active manager .... How do you determine if it is a good time to put money into the market where good expected value can be had?
Something to think on? Yes.
Otherwise known as "when you buy" vs "what you buy"
Because it can't be done, really. We can take broad educated guesses, and some supposedly have done this (sell spring 2000, rebuy late summer 03; sell late summer 08, buy early summer 09), and others have supposedly done with same with sectors (financials, retail, e.g.). But staying-with is a smarter approach.
My portfolio focuses on actively managed funds. I doubt that will change. But, the timing aspect is interesting to me as we will be listing a house for sale next week. Selling that house will generate a chunk of cash available for investment. It will increase my investment portfolio by perhaps 20%. So, I looked through my portfolio this morning.
Here is my tentative plan for putting that cash to work...
Divide the new cash equally among 5 existing positions: PONDX, VWINX, WHGIX, RPGAX, GDMZX
Invest the new $'s in 2 chunks: 1/2 as soon as the cash is available and the second half this fall...maybe in early November.
50% in stocks is my default position. So, this investment plan suggests I have a slightly skeptical but "middle of the road" sense about the current market.
@JoJo26 ... I'm asking you to provide some supporting data to posture your comment "Timming the market is a fools game." Please provide some supporting material that postures your comment. Are you talking about going all in and then all out? Or, are you talking about overweighting certain asset classes from time-to-time?
I am of the camp markets can be timmined and I have suporting material to support my postion. I called you out on your comment. Please support your position.
Well, it was my thought that this would be something that would be hard for you to prove that market timing was a fools game because there is great evidence that some long term market timing strategies do work.
To view these strategies click on the link below. I have used a few of these myself with good success.
Don't have to. Those that have followed my post on the board through the years know of my calls. What is at hand though is for you to now prove long term market timming strategies don't work. Are you up to it?
Years back when I started posting I made some statements and Derf is one that called me out. After I postured my position as I have asked you to do I earned the respect of others.
Going forward please don't make statements that you can't posture.
You are the one making statement you can't posture. You're all about confirmation bias. All you're doing is looking for stuff that defends your position. Prove to me with actual events/performance that you have been able to time the market and add value add the portfolio level before you ever claim to have a crystal ball again (I know you didn't literally claim this).
Going back to your statement ... "Timming the market is a fools game."
This is not so much about what I personally have done it is what others and their timing strategies have done. You have provided nothing that substaniates or backs up the above quoted statement. Perhaps, for you this is a fools games because you "yourself" don't yet proceess the talent necessary to execute this style of investing. Maybe, as you become a more seasoned investor your knowledge, wisdom and talent will grow.
Linked below is a five star hybrid indexed mutual fund that has successfully time the market. You wished for something "concrete" please see if you can digest the details contained in its fact sheet.
WOS, Thanks for these links and the civil discourse (I have knighted you Wise). I'm never one to step in between a good banter, but until @JoJo26 comes up with something to talk about I thought I'd distract @Old_Skeet for a moment.
SFAAX is an interesting fund. I noticed that M* has categorized it at times as (MA) for moderate allocation and (AL) for Allocation 70-85% equity, so it appears the fund dials up and dials down equity exposure based on some criteria/QA/Judgement call. I can't seem to ignore the load (which you may be able to get waived) and it's ER (seems high for Index funds).
I remember you also have reference Columbia's Thermostat fund which again must employ some QA/Judgment criteria. Do you verify multiple sources when you get into the weeds of reallocating your portfolio?
COTZX = Columbia Thermostat Fund (Z shares):
We both have referenced the "Decision Moose" site and "Ron Rowland's-Invest with an Edge" site which both seem to make market timing calls.
In the area of momentum I wanted to add "Bob's Pony Express" which does an extensive job of tracking momentum of Mutual funds and ETFs. customer.wcta.net/roberty/index.html
Valuations (P/E), can be trumped by market enthusiasm in the short run, but often these data points often warrant actions such as re-allocating and re-positioning of your investments.
Going back to your statement ... "Timming the market is a fools game."
This is not so much about what I personally have done it is what others and their timing strategies have done. You have provided nothing that substaniates or backs up the above quoted statement. Perhaps, for you this is a fools games because you "yourself" don't yet proceess the talent necessary to execute this style of investing. Maybe, as you become a more seasoned investor your knowledge, wisdom and talent will grow.
Linked below is a five star hybrid indexed mutual fund that has successfully time the market. You wished for something "concrete" please see if you can digest the details contained in its fact sheet.
How overly simplistic it is to equate Active Management with market timing. Perhaps attempting to time the market is foolish. I would also say that buying everything, no matter the cost (beta), is equally foolish. My view of Active Management is, I don't need to beat or match you to the upside. This time I'm referring to Alpha. I want to beat you to the downside. Meaning, I'll capture at least 75% of the upside and significantly less to the downside. And I use Active Management to achieve this goal. The most important thing is doing what makes you comfortable and able to sleep at night.
The active vs. passive debate will never end. Mostly because a case for either side of that argument can be made depending on the timeframe being measured. As a generic rule I subscribe to the belief that active investing is indeed a Loser's game, but there are many exceptions.
Like in so many real world situations and various circumstances, the 80/20 distribution rule applies. In general, 20% of the input or people or effort generates 80% of the output. That observation seems to work most of the time.
In the investment universe, most active tactical asset allocation funds underperform simple buy-and-hold funds, yet they are specifically designed to do so. But some do although persistence is a standing issue. Most mutual funds underperform also but some manage their performance goal over long periods. Of course, the challenge is to choose wisely before the fact. That's not an easy job.
Personally, I own a mixed portfolio of both active and passive mutual funds. To cut costs, I have decided to move more heavily into passive components, but I plan to maintain some actively managed units. That's just me; you folks do whatever allows you to sleep comfortably.
Here is a Link that might contribute to you making a decision on this controversial subject:
The Vanguard balanced fund comes out looking pretty attractive in this comparison, but this is just one of hundreds of professional and academic papers and studies that explore this issue. Most of these studies demonstrate the futility of active investing, but it is never 100% conclusive. If it were so, the debate would end. And still the debate continues.
Another question I have for the passive crowd is, how do you decide on your asset allocation? If you are making the decision, aren't you Actively managing your Passive portfolio? What are your decisions based upon? And, is there a passive way of making these decisions (based upon ever changing conditions)?
Yes indeed I find a good number of spelling errors in my writting this is due in part to, at times, a sticking key board and coming form the deep south plus a little European background. Perhaps, I'll upgrade my tablet and get one with spellcheck. But, spelling has not kept me of actively engaging the markets and trolling good money from them through the years. I think I'll take the money over good spelling in my casual writting. Seems, also, my brain moves faster than my fingers.
I don't own SFAAX but due to my study of interesting mutual funds it is one that I have kept on my list along with a sister fund EKSAX which is another five star asset allocation fund that uses some interesting an adaptive allocation strategies to position. I found the SFAAX fund for my engineer budy to compare and measure his success to that of this "professional money" fund as a benchmark.
For CTFAX (COTZX), I own this fund in my income sleeve becuse as it is currently about 90% fixed and 10% equity. This fund throttles its allocation based upon the price movement of the S&P 500 Index. Last year it held a high of about 25% equity, or there abouts, to a low of 15% possibly 10%. A good fixed income fund from my thinking that can load equities during a stock market pullback. I'm thinking it should do well in a rising interest rate environment.
And, yes I can buy in some fund families at nav. However, know that I am not an investment advisor nor broker and what I write about is things I do within my own personal portfolio. And, all those sites you have linked above I have used, or currently use, in the discovery of what others are thinking towards positioning.
When you get right down to it selling one security and buying another by some is market timing and also throttling one's asset alloction is market timing. To me, market timing is going completely all in and then back out of the markets. Adjusting one's alloction is a form of rebalancing from my perspective but to some others being active is market timing.
No doubt MJG has his perspectives and sides more towards being a passive investor much like my high school budy who by profession is also an engineer like MJG. Because, my budy, "thought" he could enage the markets with some short term packaged timing strategies (day trade) he lost a bundle. With this he went to two funds a stock index fund and a bond index fund and throttles the asset allocation between 40% to 60% equity based upon some technicals of the 500 Index. I call this throttling, some call it rebalancing, some call it makret timing ... in the end he now earns good returns where before those that made the most money were the software and platform folks which he traded through. The two of us together had hands in the development of Old_Skeets market barometer and equity weighting matrix which we both use. I added a fundamental feed (earnings) while he moves from the other two feeds which are the technical strength feed and the breath feed. He uses only two while I use all three.
There you have it folks ... Market timing is most anything you want it to be because form time-to-time securities get added and/or removed even the indexes through repositioning; and, even doing this by some folks makes it an active fund perhaps streaches it on out to market timing by addition and deletion of securities.
Time to move on. I've got things to do ...
And ... @JoJo26, I sincerely wish you the very best with your investing endeavors as you progress and become a more seasoned investor.
Skeeter, I respect your percentage adjustments within a range based on value analysis. I have no doubt it is and has worked for you. Keep at it and keep sharing your thoughts. I gain insight from your posts.
Comments
Something to think on? Yes.
How so?
Here is my tentative plan for putting that cash to work...
Divide the new cash equally among 5 existing positions: PONDX, VWINX, WHGIX, RPGAX, GDMZX
Invest the new $'s in 2 chunks: 1/2 as soon as the cash is available and the second half this fall...maybe in early November.
50% in stocks is my default position. So, this investment plan suggests I have a slightly skeptical but "middle of the road" sense about the current market.
I am of the camp markets can be timmined and I have suporting material to support my postion. I called you out on your comment. Please support your position.
Rspectfully,
Old_Skeet
Well, it was my thought that this would be something that would be hard for you to prove that market timing was a fools game because there is great evidence that some long term market timing strategies do work.
To view these strategies click on the link below. I have used a few of these myself with good success.
http://www.passionsaving.com/market-timing.html
Have a good evening JoJo26 ...
Skeet
Old_Skeet -1
Don't have to. Those that have followed my post on the board through the years know of my calls. What is at hand though is for you to now prove long term market timming strategies don't work. Are you up to it?
Years back when I started posting I made some statements and Derf is one that called me out. After I postured my position as I have asked you to do I earned the respect of others.
Going forward please don't make statements that you can't posture.
Old_Skeet +100
Going back to your statement ... "Timming the market is a fools game."
This is not so much about what I personally have done it is what others and their timing strategies have done. You have provided nothing that substaniates or backs up the above quoted statement. Perhaps, for you this is a fools games because you "yourself" don't yet proceess the talent necessary to execute this style of investing. Maybe, as you become a more seasoned investor your knowledge, wisdom and talent will grow.
Linked below is a five star hybrid indexed mutual fund that has successfully time the market. You wished for something "concrete" please see if you can digest the details contained in its fact sheet.
https://www.wellsfargofunds.com/ip/products/fund-profiles/overview.html?accountingId=WBHZ&shareClass=A
And, its Morningstar Report ...
http://www.morningstar.com/funds/xnas/sfaax/quote.html
Notice, short term it has struggled; however, its long term timing strategies "and
calls" have earned it five stars.
Again, wishing you the very best with your investing endeavors.
Old_Skeet
WOS, Thanks for these links and the civil discourse (I have knighted you Wise). I'm never one to step in between a good banter, but until @JoJo26 comes up with something to talk about I thought I'd distract @Old_Skeet for a moment.
SFAAX is an interesting fund. I noticed that M* has categorized it at times as (MA) for moderate allocation and (AL) for Allocation 70-85% equity, so it appears the fund dials up and dials down equity exposure based on some criteria/QA/Judgement call. I can't seem to ignore the load (which you may be able to get waived) and it's ER (seems high for Index funds).
I remember you also have reference Columbia's Thermostat fund which again must employ some QA/Judgment criteria. Do you verify multiple sources when you get into the weeds of reallocating your portfolio?
COTZX = Columbia Thermostat Fund (Z shares):
We both have referenced the "Decision Moose" site and "Ron Rowland's-Invest with an Edge" site which both seem to make market timing calls.
Decision Moose:
decisionmoose.com/Moosistory.html
Ron Rowland's - Invest with an Edge (Leadership Trading Method):
investwithanedge.com/leadership-strategy
In the area of momentum I wanted to add "Bob's Pony Express" which does an extensive job of tracking momentum of Mutual funds and ETFs.
customer.wcta.net/roberty/index.html
Valuations (P/E), can be trumped by market enthusiasm in the short run, but often these data points often warrant actions such as re-allocating and re-positioning of your investments.
Next time you try to tell someone off, please learn the English language. You misspell way too much ****.
The active vs. passive debate will never end. Mostly because a case for either side of that argument can be made depending on the timeframe being measured. As a generic rule I subscribe to the belief that active investing is indeed a Loser's game, but there are many exceptions.
Like in so many real world situations and various circumstances, the 80/20 distribution rule applies. In general, 20% of the input or people or effort generates 80% of the output. That observation seems to work most of the time.
In the investment universe, most active tactical asset allocation funds underperform simple buy-and-hold funds, yet they are specifically designed to do so. But some do although persistence is a standing issue. Most mutual funds underperform also but some manage their performance goal over long periods. Of course, the challenge is to choose wisely before the fact. That's not an easy job.
Personally, I own a mixed portfolio of both active and passive mutual funds. To cut costs, I have decided to move more heavily into passive components, but I plan to maintain some actively managed units. That's just me; you folks do whatever allows you to sleep comfortably.
Here is a Link that might contribute to you making a decision on this controversial subject:
https://www.advisorperspectives.com/articles/2016/08/09/how-tactical-allocation-mutual-funds-fared-over-the-last-five-years
The Vanguard balanced fund comes out looking pretty attractive in this comparison, but this is just one of hundreds of professional and academic papers and studies that explore this issue. Most of these studies demonstrate the futility of active investing, but it is never 100% conclusive. If it were so, the debate would end. And still the debate continues.
Best Wishes
@JoJo26,
Yes indeed I find a good number of spelling errors in my writting this is due in part to, at times, a sticking key board and coming form the deep south plus a little European background. Perhaps, I'll upgrade my tablet and get one with spellcheck. But, spelling has not kept me of actively engaging the markets and trolling good money from them through the years. I think I'll take the money over good spelling in my casual writting. Seems, also, my brain moves faster than my fingers.
@bee,
I don't own SFAAX but due to my study of interesting mutual funds it is one that I have kept on my list along with a sister fund EKSAX which is another five star asset allocation fund that uses some interesting an adaptive allocation strategies to position. I found the SFAAX fund for my engineer budy to compare and measure his success to that of this "professional money" fund as a benchmark.
For CTFAX (COTZX), I own this fund in my income sleeve becuse as it is currently about 90% fixed and 10% equity. This fund throttles its allocation based upon the price movement of the S&P 500 Index. Last year it held a high of about 25% equity, or there abouts, to a low of 15% possibly 10%. A good fixed income fund from my thinking that can load equities during a stock market pullback. I'm thinking it should do well in a rising interest rate environment.
And, yes I can buy in some fund families at nav. However, know that I am not an investment advisor nor broker and what I write about is things I do within my own personal portfolio. And, all those sites you have linked above I have used, or currently use, in the discovery of what others are thinking towards positioning.
@BrianW,
When you get right down to it selling one security and buying another by some is market timing and also throttling one's asset alloction is market timing. To me, market timing is going completely all in and then back out of the markets. Adjusting one's alloction is a form of rebalancing from my perspective but to some others being active is market timing.
@MJG,
No doubt MJG has his perspectives and sides more towards being a passive investor much like my high school budy who by profession is also an engineer like MJG. Because, my budy, "thought" he could enage the markets with some short term packaged timing strategies (day trade) he lost a bundle. With this he went to two funds a stock index fund and a bond index fund and throttles the asset allocation between 40% to 60% equity based upon some technicals of the 500 Index. I call this throttling, some call it rebalancing, some call it makret timing ... in the end he now earns good returns where before those that made the most money were the software and platform folks which he traded through. The two of us together had hands in the development of Old_Skeets market barometer and equity weighting matrix which we both use. I added a fundamental feed (earnings) while he moves from the other two feeds which are the technical strength feed and the breath feed. He uses only two while I use all three.
There you have it folks ... Market timing is most anything you want it to be because form time-to-time securities get added and/or removed even the indexes through repositioning; and, even doing this by some folks makes it an active fund perhaps streaches it on out to market timing by addition and deletion of securities.
Time to move on. I've got things to do ...
And ... @JoJo26, I sincerely wish you the very best with your investing endeavors as you progress and become a more seasoned investor.
Old_Skeet