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
Lipper: How To Properly Classify Mixed-Asset Funds
I classify most all asset funds, mixed asset funds, asset allocation funds, and balanced funds as hybrid along with some multi sector income funds. In addition, I also treat convertible security funds as a hybrid type fund as well. Currently, hybrid type funds make up about 45% of my portfolio.
I pretty much agree with Ol’Skeet on this. You as owner have the right to classify the funds you hold in any way you see fit. You’ll want to read the fund’s prospectus, examine its current holdings and compare its past performance with other funds you own or are knowledgeable about before you buy and to understand its place among your investments.
Words are funny things. The same word can convey many different meanings to different people. It’s helpful as an investor to be able to structure your portfolio using different terms to represent different types of funds owned. But, why on earth would your specific terms need to align precisely with someone else’s categorization? The only reason I can think of is if you are claiming to be able to place funds in neat little categories so as to facilitate marketing your supposed expertise about the relative performance of various funds.
To the first part of the equation: Even the experts can’t agree on the right “category” for many funds. To the second element: You can’t buy the past performance of a fund anyway, and unless the sellers of such category data claim psychic powers, they can’t claim to know what a fund will do in the future. Actually, in hyping certain funds within their arbitrary classifications the so called experts often contribute to a fund’s underperformance by encouraging large inflows of money into the fund. This may cause management either to buy assets at elevated prices or alter their management approach. Some of the more scrupulous managers close rhe door when inflows become extreme.
Examples of terms I use for my own purpose and which differ markedly from conventional descriptions and perceptions: OAKBX and TRRIX are both considered hybrid. PRWCX is considered equity. RPGAX is considered balanced. OREAX counts towards my real assets category. And I’ve included PRFHX in my multi-asset income section. Interestingly, that last one has closely mirrored the performance of RPSIX, a real multi-asset income fund, since I bought it last spring. It’s actually doing slightly better, despite its tax exempt status.
Comments
Keeping it simple.
I classify most all asset funds, mixed asset funds, asset allocation funds, and balanced funds as hybrid along with some multi sector income funds. In addition, I also treat convertible security funds as a hybrid type fund as well. Currently, hybrid type funds make up about 45% of my portfolio.
Words are funny things. The same word can convey many different meanings to different people. It’s helpful as an investor to be able to structure your portfolio using different terms to represent different types of funds owned. But, why on earth would your specific terms need to align precisely with someone else’s categorization? The only reason I can think of is if you are claiming to be able to place funds in neat little categories so as to facilitate marketing your supposed expertise about the relative performance of various funds.
To the first part of the equation: Even the experts can’t agree on the right “category” for many funds. To the second element: You can’t buy the past performance of a fund anyway, and unless the sellers of such category data claim psychic powers, they can’t claim to know what a fund will do in the future. Actually, in hyping certain funds within their arbitrary classifications the so called experts often contribute to a fund’s underperformance by encouraging large inflows of money into the fund. This may cause management either to buy assets at elevated prices or alter their management approach. Some of the more scrupulous managers close rhe door when inflows become extreme.
Examples of terms I use for my own purpose and which differ markedly from conventional descriptions and perceptions: OAKBX and TRRIX are both considered hybrid. PRWCX is considered equity. RPGAX is considered balanced. OREAX counts towards my real assets category. And I’ve included PRFHX in my multi-asset income section. Interestingly, that last one has closely mirrored the performance of RPSIX, a real multi-asset income fund, since I bought it last spring. It’s actually doing slightly better, despite its tax exempt status.